The coronavirus pandemic has come as a devastating blow for many industries, and one of the hardest-hit sectors is the airline space. However, some airline stocks are making a rebound. Last week, the Delta Air Lines, Inc. (NYSE:DAL) stock rallied by as much as 18.24%, and while the sector may not be out of trouble just yet, it is worthwhile to take a closer look at the company.
Key Triggers to Watch
Airlines are being regarded as a contrarian investment at this point, and that could be one of the reasons why the Delta stock might rise further. It should be noted that a weak economic situation and rising unemployment are two major factors why experts thing that demands flights might take many years to rebound.
However, recent rally suggests that the market believes that the worst might be over for Delta and other airlines. It is a particularly contrarian bet considering the fact that investment guru Warren Buffett sold his entire holding in Delta as well as in other airline stocks.
It should be noted that Delta Air has also taken certain steps in order to tackle the current situation as well. It has reduced routes considerably and also gone for sale-leaseback agreements regarding its planes in order to raise more cash.
The sale-leaseback move may not be particularly innovative, but it is generally well regarded by analysts on Wall Street. On top of that, not all investors are dumping airline stocks. The found of Miller Value Partners, Bill Miller, stated that a bet against the airline space is going to be similar to betting against the discovery of a coronavirus vaccine. His company has significant stakes in airlines, including Delta Air. Despite the recent rally in the Delta Air stock, it should be noted that it might not be the best time to invest in airline stocks.
However, at the same time, data from the past forty years suggests that airlines’ passenger growth recovered quickly after a dip brought about by an economic downturn. Moreover, the recovery in the Delta stock might start at some point this year, and many experts believe that it is currently undervalued.