While the S&P 500 index descended into negative territory on Monday, Delta Air Lines ( DAL 4.00% ) stock kept its nose up and gained altitude. The incumbent carrier’s shares rose an even 4% on the day, due in no small part to a price target boost from an analyst.
That analyst was Jefferies‘ Sheila Kahyaoglu, who now feels Delta is worth $45 per share, up substantially from her previous level of $38. As the new target is nearly 20% higher than the current stock price, Kahyaoglu is maintaining her buy recommendation.
Not every prognosticator is improving his or her sentiment on Delta, however. Last Thursday, Barclays‘ Brandon Oglenski cut his price target a bit, shaving it to $42 per share from the previous $45. Although the analyst pointed out that demand for flights “appears to be finally on a path to a meaningful and sustainable recovery,” he’s concerned with rising labor costs and notably higher fuel prices.
Typically, those two items are, respectively, the No.1 and No. 2 expenses for airlines.
The push-and-pull dynamic between higher demand on one hand, and rising costs on the other, has made investors somewhat hesitant to plow money into airline stocks. At the moment, the skies are looking relatively sunny, as fuel prices have begun to retreat to some degree. There’s no guarantee that trend will continue, though, due to the instability caused by the war in Ukraine.
Still, many people in many parts of the world are itchy to travel again. That pent-up demand will carry the day for many airlines; if fuel prices do end up dropping meaningfully, more than a few carriers could enjoy several quarters of better-than-expected fundamentals.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.