On Tuesday, Delta Air Lines Inc. (NYSE:DAL) shares surged 3.55% after confirming converting the purchase rights for 30 Airbus A321neo aircraft. The company expects the delivery of its first A321neo in the first half of next year, with the rest delivered gradually through 2027.
Delta Air Lines is positioning to reinforce strategic fleet objectives by boosting operational simplification to achieve economies of scale.
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Delta supply chain executive Mahendra Nair said:
Adding these aircraft strengthens Delta’s commitment to replacing older fleets with more sustainable, fuel-efficient jets, and offers the best customer experience in the industry.
Therefore, Delta Air Lines could significantly boost its operating margins, boosting its profit potential in a highly cyclical industry.
So, should you invest in Delta Air Lines shares now?
From a valuation perspective, Delta Air Lines shares trade at a compelling forward P/E ratio of 9.08, making the stock attractive to value investors. However, analysts expect DAl earnings per share to decline by 366% this year before bouncing back 224% next year amid the adverse effects of the pandemic.
Therefore, although the stock seems substantially undervalued, shrewd investors may opt to monitor it for a while before investing. Furthermore, with the delta covid-19 variant spreading, airline stock recovery could face headwinds in the short term, making putting DAL’s bottom line growth under threat.
Technical overview: Delta Air Lines stock price predictions for August 2021
Technically, Delta Air Lines shares seem to be trading within a descending channel formation in the intraday chart. However, the stock price recently bounced off the trendline support to surge above $40 per share following Tuesday’s announcement.
Nonetheless, with the airline industry experiencing strong bearish pressure from the covid situation, the current downward movement could continue to the foreseeable future. Therefore, as the stock price approached the trendline resistance, a pullback could be imminent.
As a result, investors can target short-term pullbacks at approximately $37.30 or lower at $33.93, while the key resistance levels are $42.99 and $47.47.
Bottom line: the case for shorting DAL stock price rebound
In summary, the DAL stock price spiked more than 3% on Tuesday, creating an opportunity for a pullback. Therefore, with the bears retaining control, the stock price seems poised for a pullback as the impact of Tuesday’s announcement begins to dissipate.
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