Delta Airlines shares remain under pressure after weaker than expected Q1 results

Wall Street’s three main indexes advanced this Wednesday while the S&P 500 and Dow Jones reached record highs. Delta Airlines (NYSE: DAL) shares have weakened more than 4% in the last five trading days, and the current share price stands around $46.82.

Fundamental analysis: Delta Airlines reported weaker reported than expected Q1 results

The S&P 500 and Dow Jones reached record highs this Wednesday and remained in a bull market despite uncertainties regarding inflation and the tax regime. The Fed chief Jerome Powell said that even though the U.S. economy continues to recover from the pandemic, this shouldn’t lead anyone to believe that the central bank would dial-up interest rates in 2021.

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The airline sector shows signs of recovery, but booking trends are expected to be weak for the next several months. Delta Airlines’ shares remain under pressure after the company reported weaker reported than expected Q1 results.

Delta Airlines reported Q1 results this week; total revenue has decreased by -58.0% Y/Y to $3.61B while Q1 GAAP EPS was -$1.85 (missed by $0.62). Total revenue has decreased above expectations, and probably it is not the right moment for buying this stock.

Adjusted pre-tax loss was $2.9 billion in Q1, and the company had total debt and finance lease obligations of $29 billion. Delta Airlines business will remain under pressure for a while, but despite this, Ed Bastian, Delta’s chief executive officer, said that the company is accelerating into the recovery.

“A year after the onset of the pandemic, travelers are gaining confidence and beginning to reclaim their lives. If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses,” said Ed Bastian.

My opinion is that this stock is still a risky investment, and there are certainly better long-term investment opportunities at the moment. The aviation segment will benefit once the economy reopens but the stock’s current price does not reflect the company’s fundamental background.

Technical analysis: Delta Airlines shares remain under pressure

Delta Airlines shares remain under pressure, and the risk/reward ratio is not good enough for “value” investors.

If the price jumps above $50, it would be a signal to trade shares, and the next target could be around $53, but if the price falls below the $40 support level, it would be a firm “sell” signal.

Summary

Delta Airlines reported weaker than expected Q1 results this Wednesday but Ed Bastian, Delta’s chief executive officer, said that the company is accelerating into the recovery. Delta Airlines is still a risky investment, and probably it is not the right moment for buying this stock. Delta Airlines shares remain under pressure, and if the price falls below the $40 support level, it would be a firm “sell” signal, and the next target could be around $35.