Cowen upgrades Delta as travel recovery continues, says shares can rally nearly 80%

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Delta Air Lines ‘ shares are due for takeoff as the industry’s recovery continues its rebound from pandemic lows, Cowen says. Analyst Helane Becker upgraded shares of the airline to outperform from market perform, saying in a note to clients Friday that increased business and international travel as pandemic restrictions ease should provide solid tailwinds for Delta moving forward. “International and business air fares are higher than average domestic fares, so the shift in mix bodes well for forward revenue,” and should continue driving higher earnings, she said. The upgrade from Cowen comes after Delta reported third-quarter earnings on Thursday that took a slight hit from Hurricane Ian but said it expects another profit in the current period as demand for travel continues its comeback. Cowen’s $54 price target suggests shares can rally about 78% despite dropping more than 22% this year. Along with the upgrade, Cowen upped its 2022 and 2023 earnings per share estimates to $2.84 and $7, respectively. Airline stocks suffered during the early days of Covid-19 as lockdowns halted most travel and resurging cases dented consumer appetite. The company said it expects capacities to bounce back to 92% of 2019 levels in the fourth quarter and anticipates a full recovery by summer 2023. Going forward, Becker said Delta’s loyalty program and network restoration efforts should offer continued tailwinds for the stock. “We think loyalty programs will be a key differentiator in this environment as consumers are likely to aggressively use their airline cards in an attempt to redeem those miles, especially for international travel,” she wrote. — CNBC’s Michael Bloom contributed reporting

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