Delta Air Lines is poised to see its stock bounce back after the company beat Wall Street expectations in its second-quarter report, according to Raymond James. Analyst Savanthi Syth upgraded the stock to strong buy from market perform, saying in a note to clients on Thursday that the path for Delta's recovery was now more clear. "We were somewhat cautious heading into the quarter due to the potential for cost volatility to weigh on investor sentiment. Following the earnings call on Wednesday, we believe expectations have been reset, albeit with some risk if the recovery stalls," the note said. The airline reported Wednesday an adjusted loss per share of $1.07 for the second quarter , while analysts surveyed by Refinitiv expected a wide loss of $1.38 per share. Revenue also beat expectations. When including government aid, Delta actually made its first profit since 2019 during the quarter. Like other airline stocks, shares of Delta have struggled recently, falling 13% over the last three months. Raymond James said the improving fundamentals should stop that slide. "The recent leg down in U.S. airline shares may be more interest rate/ inflation-related spillover to value, but we expect improving fundamentals to prevail particularly given our favorable view on business demand recovery," the note said. The firm set a price target of $58 per share for Delta, which is more than 42% above where the stock closed on Wednesday. —CNBC's Michael Bloom contributed to this report.
A Delta Air Lines Airbus A350-900 plane takes off from Sydney Airport in Sydney, Australia, October 28, 2020.
Loren Elliott | Reuters