A big factor working in Delta’s favor is their incredibly strong 5-year growth rate. Delta has grown at 20% in comparison to the industry average of 4%. Historically, they have had much higher profit margins and a slightly higher gross margin compared to the overall industry. Their ability to consistently show these types of ratios shows their sustainability down the road.
Mutual and hedge fund holdings of a company can be strongly indicative of future growth. As of March, 54% of hedge funds own DAL, up 24% from the previous quarter. Lastly, DAL’s P/E ratio is approximately the mean for the airline industry indicating that it is still growing but also not yet overpriced. When comparing
Delta’s stock price to other airlines with a similar P/E, Delta’s stock price relatively cheap and allows for future growth.
The Trade: I bought the DAL Sep 20 Calls for $.76
Risk: $76 per 1 lot
Reward: Unlimited
Breakeven: $20.76
Greeks of this Trade:
Delta: Long
Gamma: Long
Vega: Long
Theta: Short
—
Andrew Keene
President/Founder
Andrew@KeeneOnTheMarket.com