Delta Air Lines Inc. (DAL) delivered a bit of good news/bad news this week. The airline beat fourth-quarter earnings expectations, but its forward guidance disappointed investors enough to send shares down over 2%.

According to Morgan Stanley analyst Ravi Shanker, who maintains an Overweight rating and $90 price target on the stock, Delta reported Q4 earnings of $1.55 per share, topping the consensus estimate of $1.53. Revenue came in at $14.606 billion, just slightly below expectations of $14.682 billion but still up about 1% year-over-year.

The real story might be what's happening right now. Management noted that "the first 7 days of January were DAL's best cash sales ever, up double digits," Shanker highlighted in his note. That's a pretty strong signal that travel demand isn't slowing down.

Delta closed out 2024 with $5 billion in pre-tax profit, double-digit margins, and record free cash flows of $4.6 billion. Management said they're "pleased with how the year closed out despite the challenges faced in 2025" (presumably meaning 2024, or perhaps they're already thinking ahead).

So why the stock decline? The midpoint of Delta's guidance came in below what Wall Street wanted to see. But Shanker thinks management is being deliberately conservative, "given elevated headline risk in the last few years." Translation: they've learned to underpromise after a few turbulent years.

Shares traded down 2.22% at $67.79 on Wednesday. With a market cap of $44.26 billion and a P/E ratio of 9.05, Delta is trading near the high end of its 52-week range while maintaining a relatively low valuation compared to historical sector averages.