Is Delta Air Lines, Inc. (NYSE:DAL) Trading At A 41% Discount?

Simply Wall St.11-21 20:00

Key Insights Using the 2 Stage Free Cash Flow to Equity, Delta Air Lines fair value estimate is US$107 Delta Air Lines' US$63.64 share price signals that it might be 41% undervalued The US$...

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(NYSE:DAL) Trading At A 41% Discount?","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Delta Air Lines fair value estimate is US$107 \n Delta Air Lines' US$63.64 share price signals that it might be 41% undervalued \n  The US$...</p>\n\n<a href=\"https://finance.yahoo.com/news/delta-air-lines-inc-nyse-120021324.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Is Delta Air Lines, Inc. (NYSE:DAL) Trading At A 41% Discount?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIs Delta Air Lines, Inc. (NYSE:DAL) Trading At A 41% Discount?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-21 20:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/delta-air-lines-inc-nyse-120021324.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Delta Air Lines fair value estimate is US$107 \n Delta Air Lines' US$63.64 share price signals that it might be 41% undervalued \n  The US$...</p>\n\n<a href=\"https://finance.yahoo.com/news/delta-air-lines-inc-nyse-120021324.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TV","symbol_name":"墨西哥电视","start_time":0,"source_url":"https://finance.yahoo.com/news/delta-air-lines-inc-nyse-120021324.html","article_id":"2485981614","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/n5wYO3H4EJ5TTR9f1Phqyw--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/0ae45a2f52458087c8f64e8dd4128ac9"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485981614","pubTimestamp":1732190421,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Using the 2 Stage Free Cash Flow to Equity, Delta Air Lines fair value estimate is US$107. Delta Air Lines' US$63.64 share price signals that it might be 41% undervalued. The US$69.31 analyst price target for DAL is 35% less than our estimate of fair value. Today we will run through one way of estimating the intrinsic value of Delta Air Lines, Inc.  by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow  model for this purpose. Before you think you won't be able to understand it, just read on!Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"TV":"墨西哥电视","LU0052756011.USD":"TEMPLETON GLOBAL BALANCED \"A\" (USD) INC","LU0128525689.USD":"TEMPLETON GLOBAL BALANCED \"A\"(USD) ACC","IE00BFMHRM44.USD":"NEUBERGER BERMAN GLOBAL EQUITY MEGATRENDS \"A\" (USD) ACC","BK4500":"航空公司","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4588":"碎股","BK4100":"有线和卫星","NYSE":"纽交所","LU0310800965.SGD":"FTIF - Templeton Global Balanced A Acc SGD","BK4211":"区域性银行","DAL":"达美航空","BK4008":"航空公司","LU1267930227.SGD":"TEMPLETON GLOBAL BALANCED \"AS\" (SGD) ACC A","FCF":"第一联邦金融","BK4585":"ETF&股票定投概念"},"translate_title":"达美航空公司（纽约证券交易所股票代码：DAL）的交易价格有41%的折扣吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DAL":1,"DCF":1,"FCF":1,"NYSE":1,"TV":1},"content_text":"Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Delta Air Lines fair value estimate is US$107 \n Delta Air Lines' US$63.64 share price signals that it might be 41% undervalued \n  The US$69.31 analyst price target for DAL is 35% less than our estimate of fair value \n\n Today we will run through one way of estimating the intrinsic value of Delta Air Lines, Inc. (NYSE:DAL) by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. \n Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. \n View our latest analysis for Delta Air Lines \n Step By Step Through The Calculation \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$3.41b\nUS$2.97b\nUS$3.68b\nUS$3.81b\nUS$3.94b\nUS$4.06b\nUS$4.18b\nUS$4.30b\nUS$4.42b\nUS$4.54b\n\n\nGrowth Rate Estimate Source\nAnalyst x5\nAnalyst x2\nAnalyst x1\nEst @ 3.58%\nEst @ 3.29%\nEst @ 3.09%\nEst @ 2.95%\nEst @ 2.85%\nEst @ 2.78%\nEst @ 2.73%\n\n\n Present Value ($, Millions) Discounted @ 7.8% \nUS$3.2k\nUS$2.6k\nUS$2.9k\nUS$2.8k\nUS$2.7k\nUS$2.6k\nUS$2.5k\nUS$2.4k\nUS$2.3k\nUS$2.1k\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$26b\n After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We discount the terminal cash flows to today's value at a cost of equity of 7.8%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$4.5b× (1 + 2.6%) ÷ (7.8%– 2.6%) = US$90b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$90b÷ ( 1 + 7.8%)10= US$43b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$69b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$63.6, the company appears quite good value at a 41% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NYSE:DAL Discounted Cash Flow November 21st 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Delta Air Lines as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.8%, which is based on a levered beta of 1.252. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Delta Air Lines\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nDebt is well covered by earnings and cashflows.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for DAL.\n\n\n\nWeakness\n\nEarnings growth over the past year is below its 5-year average.\n\n\nDividend is low compared to the top 25% of dividend payers in the Airlines market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\nGood value based on P/E ratio and estimated fair value.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for DAL?\n\n\n\n Looking Ahead: \n Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For Delta Air Lines, we've compiled three fundamental factors you should consider: \n\n Risks: As an example, we've found 2 warning signs for Delta Air Lines that you need to consider before investing here. \n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for DAL's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485981614"}