Wind Shear: The Most Violent Way to Die… (DAL, NVO)

Posted on July 12, 2023

Delta Airlines (NYSE:DAL) has been soaring Icarus-like toward the sun for close to two months, so for the bulls, those ceaseless yawns and swallows to make their ears pop has been a real test.

Stalled Out

At the moment, however, the engines are cooling, and we’ve a hunch that pilot, crew and passengers are about to experience a violent bout of turbulence that will see everyone reaching for a barf-bag.

That said, we’re closing our NVO trade for some healthy scratch before we put DAL on the runway.

And it goes like this—

Details of the trade can be accessed HERE, but the brief version is like this:

We’re now in possession of a credit of $4.40 and the NVO October 20th 155 synthetic short.

And with the stock now at 152.25, we see little reason to wait.

Buy back the CALL for $8.30 and sell the PUT for $9.20.

That gives you $5.30 NET on just a dime laid out.

And that’s 5300%.

So let’s return now to flight 000 and see how the fundamentals align.

  • P/E is 16.46, but a year from now will be a meagre 6.77, says consensus.  Not good.
  • Dividend Yield is a nominal 0.82%, while…
  • Price to Book is too big at 4.97.
  • Also too big is Debt to Equity at 3.51x.
  • Lastly, the company’s EPS over the last five years has SHRUNK by 16.20% per year (Covid-induced in part, of course).

Much of the recent gains have come on “increased demand” for travel, the so-called summer flying/driving season.

So they say…

But we don’t see it.

We see this—

May G-d help us continue.

Many happy returns!

Matt McAbby


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