The Delta Airlines stock was under pressure on Monday as investors reflected on the wave of flight cancellations and the upcoming quarterly earnings. The stock is trading at $43, valuing the airline at more than $27 billion.

Delta Airlines earnings preview

The Covid-19 pandemic ravaged the aviation sector, which became one of the worst affected in the industry. Many companies like IAG, Delta, United, and Lufthansa had to pack their jets as demand dried. Fortunately, many American airlines received billions of dollars in government bailouts. According to IATA, airlines lost more than $200 billion due to the pandemic.

In the past few months, however, the sector has made some improvements as more states have reopened. Many countries have reopened their borders and others like Australia are making final preparations to reopen. This trend has happened due to the ongoing trends in vaccinations. 

The Delta Airlines stock price will be in the spotlight this week as the company publishes its quarterly results. In the second quarter, the company’s revenue jumped to $7.13 billion, which was better than the median estimate by more than $880 million. Its loss narrowed to about $1.02 per share. 

In the third quarter, data compiled by SeekingAlpha is expected to show that the company’s revenue jumped to more than $8.46 billion while its profit per share rose to 17 cents. This profitability will be helped by a jump in volume demand for both domestic and international flights. 

The company has already hinted that its numbers will be good. In a report published earlier this month, the company said that it was on course to achieve its previous guidance. This guidance said that the company’s revenue would drop by between 30% and 35% from the same period in 2019. By restating its guidance, the company reversed its earlier decision when it slashed its outlook as the Delta variant spread.

Challenges remain

Still, Delta and other airlines are facing some significant challenges. First, there is the issue of vaccine mandates, which have raised the possibility of worker shortages. 

During the weekend, SouthWest cancelled thousands of flights, partly because of the vaccine mandates. The company’s employees union warned that mandates would lead to staff shortages. 

Another big challenge for Delta Airlines is that costs of doing business are soaring. The most important cost in running an airline is fuel. And recently, the prices of crude oil have jumped to the highest level in seven years. While airlines use hedging to cushion higher prices, there is a likelihood that higher prices will affect their margins.

Still, Delta is optimistic about its business. The company has recently made investments in Boston, where it expects to see strong demand. It expects that it will have 160 daily nonstop flights  to 55 destinations from Boston’s Logan Airport.

Meanwhile, analysts are generally bullish on Delta. For example, those at Wolfe Research have an outperform rating on the stock. Similarly, Morgan Stanley analysts expect that the shares will jump to $67 while those at Jefferies and JP Morgan expect it to rise to $67.

Delta Airlines stock price analysis

The Delta Airlines stock price has been under pressure in the past few weeks. The shares have declined from a high of $46 to $43. They are also along the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved from the overbought level of 75 to 50. 

Therefore, the stock will likely keep falling as bears target the key support at $41.77. This performance is known as a break and retest pattern. If it happens, the stock will then resume the bullish trend.

The 4-hour DAL price chart