Delta Air Lines, Inc. (NYSE:DAL) — I recommended DAL stock as the Trade of the Day several times last year based on pent-up demand for air travel, lower fuel prices and solid technicals. I most recently featured it on Jan. 2.
S&P Capital IQ reiterated its “strong buy” rating on DAL stock and increased its price target from $50 to $62. Its analysts project improved air travel demand this year and are encouraged by Delta’s goal to reduce debt to $5 billion by the end of 2016. Its debt stood at $7.3 billion at the end of 2014.
Capital IQ estimates 2015 earnings will increase nearly 50% to $4.71 per share and projects another 22% jump to $5.75 in 2016.
Credit Suisse recently increased its 2015 EPS estimates to $4.65 from $4.52 and maintains a price target of $62 on DAL stock. Its analysts are looking for a $4 billion share buyback plan over two and a half years.
DAL stock has been in a bull market since November 2012, but in October, it tested its trend by falling to just above $30. The test was successful, and by late January, shares achieved a new high at over $51.
Since then, DAL stock has been consolidating within a saucer formation with a low at $43 and resistance at $48 to $50. A possible selling climax occurred last month, accompanied by a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR).
The stock is currently trading slightly below the 200-day moving average at $43.47 and the 50-day moving average at $44.60. The near-term success of a bullish trade to my objective of $50 depends on a higher-than-average-volume penetration of the moving averages. However, it is a relatively low-risk trade if you enter a stop-loss order at $41.
Buy DAL stock at $43 with a trading target of $50 for a gain of 16%. This also qualifies as an investment-grade recommendation for long-term investors.
