Delta ($DAL) vs. Delta (COVID-19) | Sentiment Spotlight 9/23/2021 ✈️
Delta stock has been embattled over the past year... but news sentiment paints a silver lining for its management team. Hipe or Snipe? -->
Hey hey — welcome to this week’s bonus letter. Today we’ll be taking a look at conversation surrounding Delta Air Lines Inc. ($DAL) to see if the company’s ~turbulent~ news sentiment over the past few months can shed any light on what to expect from the airlines industry heading into this Fall. As always, the best way to support this newsletter is by showing some love with a like, comment, or sharing with a friend. If you enjoy this report and what to keep up-to-date on all of our news sentiment research, make sure to subscribe below 😊🤝
1. Intro to Delta Air Lines ($DAL) 🛫
The past year and a half has been about the worst period in the past 20 years to be running an airline business. In an industry that was already pretty universally unliked by the American public (this 2019 poll put airlines near the top of America’s most hated industries list; right below the pharmaceutical industry and the Federal Government itself), COVID-19 has cut industry morale to an all-time low. Airlines have had no choice but to adapt — half-empty flights, employee layoffs, and all-but-halted global travel (of which pleasure travelers accounted for 88%) for nearly a year has left the industry with virtually no wiggle room, and mounting debt.
But it isn’t all bad. Even in a desert, there can be a few oases (the old flower in the sidewalk crack analogy). Some analysts are making the case for Delta. As one of America’s big-four airliners alongside Southwest ($LUV), American ($AAL), and United ($UAL) — together the quad comprises approximately 2/3rds of domestic market share as of 2020 — Delta’s odds are as good as any to see through to the light at the end of the COVID-19 tunnel on top. With renewed investment in expanding its fleet and workforce in recent months, there’s even a very real possibility that Delta could come out stronger than it was at the beginning of the Coronavirus pandemic.
Taking a look at Delta’s stock price over the period, it’s not surprising that its price fell off a cliff back in March 2020 when global travel became non-existent. But since then, $DAL’s price has meandered upwards in relatively quick fashion, peaking back up at $52.50 per share in April 2021 (roughly 8% below its pre-pandemic price) before selling off back down to the $40 level where it has sat over the past two months as the world braces for the fourth wave COVID-19 Delta variant to run its course (no pun intended, believe me). While every stock in the airline industry has seen some stagnation over the past few weeks, compared to its peers, Delta has been on the slower side. The question: where will Delta and friends go next? Where will they all be in 6 months, 2 years, 5 years?
The truth about airlines is that Delta still trades like a legacy carrier, despite being arguably the best-run business in the industry, right up there with SouthWest in terms of customer satisfaction ratings. Southwest on the other hand trades like the Dominoes Pizza of airlines — a “revolutionary” new-age company looking to disrupt at every turn. But when it comes to enterprise value (ie. market cap + debt) the pair begin to look much more similar. Southwest and Delta appear equally beaten down in recent months (SouthWest has actually lost more than twice as much in terms of enterprise value — 35% — than Delta — 16% since the start of the pandemic). This comparison for the entire industry is synopsized well here by Jason Hall and Lou Whiteman.
The difference becomes even more glaring when we consider the news coverage sentiment of the two companies in recent months: while Southwest has received roughly 72% positive sentiment over its runup of the past 3 months, Delta in comparison has only seen roughly 54% — slightly better than completely neutral, and highly polarizing at that; folks can’t seem to agree whether or not Delta’s decisions have been positive or negative. Below we’ll dive into Delta’s news coverage of the past month to see why it hasn’t been more beneficial to the company’s stock performance.
2. $DAL News Events and Headlines
Over the past two months, $DAL has received roughly 450 unique financial headline publications, easily the most out of any company in its peer group. Love ‘em or hate ‘em, the vast majority of Delta Air Lines articles over the past two months have been written about its management team. Many of the headlines have centered around the team’s handling of the pandemic — in fact, I dare you to find a $DAL article that doesn’t mention coronavirus. The team has been dragged in the news for a multitude of COVID-19 reasons: mandating that its employees get vaccinated (or be subject to a $200 extra per month in health insurance premiums), requiring that middle seats be left open on flights to allow for social distancing, and even refusing to call the Delta variant by its name (!) to avoid any association at all costs.
While these are all relatively controversial decisions, I could bet my bottom dollar that Delta’s management team thought long and hard about the business implications they’d have on their bottom dollar. Further, I’d go out on a limb to say that the team probably didn’t enjoy having to make these decisions. But at the end of the day, the company has stuck its neck out to address one of the most crucial issues affecting its cash flow: the safety of its employees and passengers. There have been other less-COVID-related Delta headlines of the past few months as well too. The company has made plans to purchase an additional 30 aircraft by year’s end (to add to its existing fleet of 818 aircraft) and has begun plans to hire an additional 5,000 employees in the coming months. The summarized timeline of important $DAL events in recent months:
March 2021: COVID-19 lightens up in Spring 2021, then boom: Delta variant
July 2021: Delta considers purchase of additional 30 aircraft and hiring of +5,000 employees
August 2021: Delta CEO Refuses to Call it the Delta Variant (lol)
August 2021: Employee vaccination mandate
EU Travel ban to be in talks to be lifted (Fall 2021?)
Top $DAL Headlines by Sentiment 📰
Of the articles published about Delta in recent months, many have been either highly optimistic, pessimistic, speculative (ie. future-tense), and reactive (ie. past-tense) in their sentiment expression of $DAL. Here are the top articles scored across each of these metrics from the past two months:
Most Optimistic Article:
Delta Air Lines buys 30 more Airbus A321neo aircraft | eTurboNews (optimism: 95.83 ) 2021-08-24
Delta Air Lines plans to hire 5,000 workers as it starts to recover from the COVID-19 pandemic slump | EconoTimes (optimism: 88.89 ) 2021-07-29
Most Pessimistic Article:
Covid-19 Triggers $12bn Dip In Largest Airlines Market Cap | Inside Business Nigeria (react: 94.44 ) 2021-08-11
Delta Airlines Will Force Unvaccinated Employees to Pay Monthly Fines as Corporations Enforce Vaccine Mandates | Big League Politics (speculation: 94.44 ) 2021-08-25
Spotify announces partnership with Delta to provide in-flight music service | 9to5Mac (spec: 88.89 ) 2021-09-02
Most Reactive Article:
Jimmy Fallon and Seth Meyers roast Delta’s CEO for refusing to call the virus by name: 'He said from now on, our airline is pronounced Del-TAY’’' | Business Insider (pess: 88.24 ) 2021-08-30
3. $DAL News Sentiment vs. Price
Over the past two months, $DAL news sentiment has shown roughly a +0.60 correlation with $DAL stock price (which is considerably positive). This means that when $DAL stock price goes down, the news seems to follow right along (and vise versa). The majority of sentiment-rich articles published about $DAL over the period have centered on its management team’s handling of the COVID-19 pandemic. The interesting part comes when you compare the sentiment of articles written about the company itself versus its management team: while articles about $DAL’s stock have leaned relatively pessimistically recently due in large part to the inopportune position the company (and the rest of the airline industry) finds itself in, when we look at articles about the management team
specifically, the conversation paints a different story. Of articles published about $DAL *management*, sentiment has actually leaned relatively optimistically in recent weeks, with analysts arguing that Delta’s tough decision making in closing middle seats and requiring employee vaccinations — like it or not — has allowed the company to differentiate itself at the cost of near term revenue. Other airlines have not had the luxury of differentiating themselves in the same way $DAL has, and it’s become clear that Delta is willing to sacrifice short-term revenue with the intention of reaping the seeds down the road in the form of increased brand loyalty and brand equity.
4. Delta Hype-or-Snipe Rating
Delta has been the most intriguing name in the airline industry over the past six months. While $DAL stock has fallen along with the rest of its peers over the course of the COVID-19 pandemic, it has seen a relatively significant rise over the past three months and has stagnated in recent weeks. While Delta’s news sentiment has been relatively neutral on the whole over the period, upon deeper introspection its conversation has been relatively polarizing. Diving deeper, while much of the sentiment surrounding $DAL stock has been pessimistic in nature, sentiment surrounding Delta’s management has actually leaned optimistically following some tough decisions from the team (vaccinations, new purchasing/partnerships/hiring).
Looking at the company’s enterprise value, it’s clear that Delta has been able to differentiate itself as one of the only airlines that can afford to take a loss when it comes to allowing all passengers to fly comfortably. And with its high enterprise value relative to competitors, it seems Delta will be able to play the game a lot longer than its lower margin competition like Spirit and Southwest. While airlines are still a risky play as a whole as they wait for business class and international travel to rebound back to pre-pandemic levels, given some time and the sentiment surrounding $DAL management, along with its ability to play the long game and secure customer loyalty with more comfortable pandemic flight experiences (albeit while sacrificing some short-term revenues) we stamp Delta with a hype-or-snipe rating of: SLIGHTLY SNIPABLE. It likely won’t make you any money over the next month, but the fact that it’s trading like a legacy play despite its unmatched handling of the pandemic is definitely cause for some attention. If anything, the best thing to do might be to short the industry as a whole ($JETS ETF is a great choice) and pick up a few shares of $DAL for the ride. That’s it for today’s spotlight report, let us know what you think below, thanks for reading! 🙏
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