Delta Air Lines, Inc. (DAL) — I recommended DAL stock several times in the past year based on solid technicals and saying it could benefit from pent-up demand for air travel. It is now even more attractive thanks to lower fuel prices.
Credit Suisse Group AG ADR (CS) has an “outperform” rating on DAL stock and recently raised its price target to $63 from $56. Its analysts increased their 2014 earnings estimate by $0.06 to $3.34 per share. They also raised their 2015 estimate by $0.81 to $5 per share, which they said may still be “conservative.” They note management’s statement that lower fuel prices will be a windfall for shareholders, not customers.
DAL stock has been in a bull market since November 2012. Until the October correction, shares found support at the 50-day moving average. Following that pullback, DAL stock reversed up. It jumped through its 50-day moving average, and then through the top of a right triangle on a breakaway gap. These are all very powerful technical events.
Now at over $49, DAL stock is close to my original target of $50. But lower fuel prices have made this investment even more attractive. Shares are advancing in a bull channel supported by a new MACD buy signal.
DAL stock has no discernible top. I’m raising my target to $60-plus, which is more than 20% higher than current prices, and I may increase it further if fuel prices continue to fall.
Support on a pullback is at the 50-day moving average near $44. The stock is seeing heavy demand, but it could become volatile. Investors may want to buy 50% now and take a full position on a pullback to $45.
