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Delta Air Lines (NYSE: DAL) stock has at least 76% upside potential over the next 12 months or so, according to a Morgan Stanley analyst who raised the company’s stock price target from $75 to $85 recently while retaining an “overweight” rating on the stock. It gets better; in Morgan Stanley’s “bull case” scenario, the stock could go to $110. Delta stock currently trades around $42.

Is the price target realistic?

It’s never a good idea to slavishly follow Wall Street analyst estimates. All it will take is reports of a decline in air travel amid a global economic slowdown, and analysts will rush to slash estimates — a real possibility in the highly cyclical airline industry.

That said, Delta Air Lines is a highly attractive stock. It’s a play on the ongoing recovery in the air travel industry. Its growing focus on the premium customer is also transforming its profit potential.

The loyalty card program is critical to Delta’s growth

Delta is not just trying to grow its higher-margin premium cabin sales; it’s also growing its SkyMiles loyalty program, which entails more revenue from spending on Delta American Express credit cards — a fast-growing source of income for the airline. This is an especially pertinent argument when considering the higher-end customers paying for premium services.

Moreover, management is driving the adoption of SkyMiles, particularly among younger, more travel-aware customers, through offering free WiFi and partnerships with companies like Starbucks. Indeed, the Morgan Stanley analyst also believes that the focus on growing premium cabin sales is an upside driver for the stock.

Where next for Delta Air Lines

The stock looks a great value when trading on less than 7.5 times the estimated 2024 earnings, even if you factor in some risk from increased credit card industry regulation, still high fuel prices, and the possibility of a hard landing for the economy.

If the commercial aerospace recovery continues and Delta achieves its aim to grow earnings and free cash flow dramatically, then the price target may well be within reach, and the stock is a buy.

Should you invest $1,000 in Delta Air Lines right now?

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American Express is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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