Can Delta Stock Keep the Wind At Its Back?

DAL is up 10% in 2021 but 49% year-over-year

Sep 27, 2021 at 12:17 PM
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Delta Air Lines, Inc. (NYSE: DAL) is currently trading at $44.65, its highest level in roughly three months. We can't truly discuss an airline stock without addressing the COVID-19 impact that has been in the headlines. Delta Air Lines was one of the first major companies to take action to persuade employees to get vaccinated. As of Sept. 23, DAL announced an 82% employee vaccination just three weeks following the implementation of a $200/month health insurance surcharged for unvaccinated employees.

Delta steps into the earnings confessional in two weeks on Oct. 11. The stock has a rather muted history of post-earnings reactions. In the last eight quarters, DAL has averaged a post-earnings move of 2.5%, regardless of direction.

Delta stock is up 10% in 2021 and 49% year-over-year. The shares' 320-day moving average emerged as a solid floor back in August, setting up a nifty bounce in September, even amid broad market seasonality.

DAL Stock Chart

From a fundamental point of view, Delta stock continues to have a very attractive valuation as a long-term investment. Although Delta Air Lines’ earnings only recently bounced back to profitability, DAL has a decent forward price-earnings ratio of 9.49. Furthermore, Delta's annual net income has decreased about $11.4 billion and annual revenues are still down more than 60% compared to what was reported for fiscal 2019, which was before the pandemic’s effects hit the entire travel industry. Overall, Delta stock has strong potential as a recovery play given the DAL's pre-pandemic figures.

How should options traders tread? DAL options are well-priced at the moment, from a volatility perspective. The stock's Schaeffer's Volatility Index (SVI) of 34% stands higher than 5% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.  It's also worth pointing out that the stock ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 26 out of 100. In other words, the security has consistently realized lower volatility than its options have priced in, making the stock a potential premium-selling candidate.

 

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