1-Star Stocks Poised to Plunge: Delta Air Lines?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, airline operator Delta Air Lines (NYS: DAL) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Delta's business and see what CAPS investors are saying about the stock right now.
Delta facts
Headquarters (Founded) | Atlanta (1924) |
Market Cap | $6.78 billion |
Industry | Airlines |
Trailing-12-Month Revenue | $33.64 billion |
Management | CEO Richard Anderson (since 2007) |
Return on Capital (Average, Past 3 Years) | 4.2% |
Cash/Debt | $3.8 billion / $15.2 billion |
Competitors | Southwest Airlines (NYS: LUV) United Continental Holdings (NYS: UAL) |
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 42% of the 912 members who have rated Delta believe the stock will underperform the S&P 500 going forward. These bears include All-Star DarthMaul09, who is ranked in the top 1% of our community, and south777seas.
Just last week, DarthMaul09 cautioned Fools about getting into the airline business:
Depressed consumer confidence, high travel costs and the added stress going through airport security will eventually take their toll on the airline industry. Additional fees and luggage restrictions won't help the problem. Until major improvements occur in these areas the airlines are likely to see continued weakness.
Delta, in particular, even sports a lofty price-to-book ratio of 8.9. That represents a clear premium to industry peers like Gol Linhas (NYS: GOL) (1.5), Southwest (1.2), and United Continental (3.2).
CAPS member south777seas elaborates on the Delta bear case:
[M]ake no mistake that for the foreseeable future, profit margins are fully at the mercy of the price of Brent Crude. Not in a good position to be in at this time in history. Trunk airlines are the walking dead and are all slowly bleeding to death from fuel, crushing debt, and the nonstop fare wars from upstarts, just to name a few. The current government in Washington's energy solution seems to be for us to keep checking the tire pressure of our cars. Things could change in 2012, but for now I see no sustained growth near term minimum.
What do you think about Delta, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Southwest. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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