Delta Air Lines, Inc.DALNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Terminal value represents 88% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $98.14 per share(market-calibrated)

+52.7%

Upside to Fair Value

Current

$64.25

Pure Model

$98.66

Fair Value

$98.14

Bull Case

$125.15

Bear Case

$74.39

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

2.04%

Calibrated Growth

2.18%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $98.66.

What's Driving This Ratingfor DAL

↓

CapEx normalizing toward maintenance

Historical CapEx is 7.76% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$3.5B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 2.00% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $8.4B (10.12% margin).

→

Moderate revenue growth

Analyst consensus projects -1.62% revenue growth, fading to 2.25% by Year 10. Revenue reaches $83.3B (vs $63.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $67.17/share (17.3x terminal FCF) while exit multiple gives $130.15/share (30.6x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 2.04% is close to the model's 2.25% (only 21bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 58.80% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.34

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.52%

Cost of Debt

Pre-tax Cost of Debt4.33%

Tax Rate19.08%

After-tax Cost of Debt3.51%

Equity Weight (E/V)66.38%

Debt Weight (D/V)33.62%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (66.38% × 10.52%) + (33.62% × 3.51%)

= 8.16%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$62.3B	$69.0B	$74.5B	$77.9B	$83.3B
EBIT	$1.2B	$1.4B	$3.1B	$5.7B	$8.4B
Tax	$238M	$263M	$597M	$1.1B	$1.6B
NOPAT	$1.0B	$1.1B	$2.5B	$4.6B	$6.8B
+ Depreciation	$2.2B	$2.5B	$2.7B	$2.8B	$3.0B
- Capex	$4.8B	$4.7B	$4.4B	$3.8B	$2.9B
- Δ NWC	-$103M	$312M	$164M	$171M	$183M
Free Cash Flow	-$1.5B	-$1.4B	$680M	$3.4B	$6.7B
Discount Factor	0.925	0.790	0.675	0.577	0.456
Present Value	-$1.4B	-$1.1B	$459M	$2.0B	$3.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.7B

Terminal Growth Rate2.25%

WACC8.16%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$116.1B

PV of Terminal Value$53.0B

Exit Multiple Method

Year 10 EBITDA$11.4B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$205.6B

PV of Terminal Value$93.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.3B

PV of Terminal Value$53.0B

Enterprise Value$60.3B

(-) Net Debt$16.8B

Equity Value$43.5B

Shares Outstanding648M

Price per Share$67.17

Exit Multiple Method

PV of Projected FCFs$7.3B

PV of Terminal Value$93.8B

Enterprise Value$101.1B

(-) Net Debt$16.8B

Equity Value$84.3B

Shares Outstanding648M

Price per Share$130.15

Pure Model Fair Value

$98.66

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
6.16%	$134.14	$141.12	$149.88	$161.20	$176.42
7.16%	$110.57	$114.92	$120.14	$126.56	$134.61
8.16%	$92.40	$95.28	$98.66	$102.65	$107.46
9.16%	$77.79	$79.80	$82.09	$84.75	$87.85
10.16%	$65.70	$67.15	$68.78	$70.63	$72.74

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$74.39

15.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.67

Base Case

$98.66

53.6% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.34

Bull Case

$125.15

94.8% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.14

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-1.62%

Year 3 Revenue Growth4.74%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin2.00%

Terminal EBIT Margin13.00%

Tax Rate19.08%

Historical Capex / Rev7.76%

Terminal Capex / Rev3.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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