Berkshire Hathaway’s (NYSE:BRK) recent 13F filing showed that it had sold all of its airline stocks. Warren Buffett had already promised Berkshire would sell its shares of Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), and American Airlines (NASDAQ:AAL). So, when DAL stock fell modestly last week, markets did not think that Berkshire’s news was to blame.

But with Delta’s stock now climbing and well off its 52-week lows, investors should buy the shares over those of other airlines.

Capacity Restrictions Hurt DAL Stock

On Aug. 20, Delta said it would continue blocking the middle seats on its flights into January 2021. Although the limited capacity will weigh on the company’s revenue, it’s making the right move. Delta Chief Customer Experience Officer Bill Lentsch said, “We believe that taking care of our customers and employees and restoring confidence in the safety of air travel is more important right now than filling up every seat on a plane.”

Delta’s actions should improve its image among the public. Customers who are already hesitant to fly will choose this airline over those who don’t leave their middle seats open.

But the demand for flights is still weak. For the week that ended on Aug. 20, the number of travelers who entered America’s airport was down week-over-week, according to the Transportation Security Administration.

Looking ahead, Delta will increasethe number of flights on its international routes  in late 2019 and next year. Although it is too early to know for sure, the easing or elimination of the Covid-19 pandemic could justify the higher number of flights.

But first, countries need to open their borders. Until that happens, the airline’s international traffic will not rise much.

Delta Has the Healthiest Balance Sheet in the Sector

Compared to its peers, Delta has more cash on hand and less debt.

Data courtesy of Stock Rover

Cash burn remains a problem for all airlines. Still, by urging its 3,000 flight attendants to take unpaid leave, Delta cut its operating costs. Since it expects to have more flight attendants than needed in 2021, the airline needed to address the over-staffing issue now.

In March, the airline’s executives took a 50% pay cut. So the flight attendants will not be the only ones making a sacrifice.

The Fair Value of DAL Stock

Simplywall.st has a price target of $65 on Delta’s stock. Wall Street analysts have an average price target of $38.86 on the shares, according to Tipranks.

Those are lofty expectations.

The stock can trade sharply higher, but the company must overcome near-term challenges first. It has plenty of liquidity, so there is no risk of it going bankrupt. Its revenue will only rebound if global travel restrictions ease, and that is largely dependent on the spread of the virus decelerating.

The continuing meaningful increases of  coronavirus cases suggests that travel restrictions will not end soon. South Korea and Germany are among the places experiencing a resurgence of cases.

Even though many of those catching the virus in those countries and in the U.S. are younger, less susceptible people, investors cannot ignore the continuing rapid spread of the virus. Investors need to weigh the ongoing risks of the pandemic against the low valuation of DAL stock.

I am neutral to slightly bearish on Delta. And even though the stock could rally in the near-term, it is only suitable for speculators.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.