eyeQ: this stock’s a useful sentiment gauge
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Here, they consider a company on the eve of an earnings update.
8th April 2025 09:47
by Huw Roberts from eyeQ
“Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance.” eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
Delta
Macro Relevance: 63%
Model Value: $23.18
Fair Value Gap: +37.83% premium to model value
Data correct as at 8 April 2025. Please click glossary for explanation of terms. Long-term strategic model.
This is not a trade recommendation. First, despite the large valuation gap, Delta Air Lines Inc (NYSE:DAL)’s macro relevance is below our 65% threshold for a regime. To fire any official signal we need that stock to be driven primarily by macro forces.
But more importantly, in incredibly volatile markets like these, the most prudent thing to be doing is staying calm and waiting for opportunities in the core companies on your watchlist, the stocks you know best.
Delta, America’s largest airline by revenue and market share, is probably not on most UK retail investors’ list. However, it reports earnings tomorrow and this information will provide a critical anecdotal update.
Airlines are a good proxy for consumer behaviour. Fears of recession, concerns around stagflation, worries about the US tourist industry being hurt by Trump’s America First policy stance will all be caught by the airline industry.
From eyeQ’s perspective, the fall in model value has been brutal. It’s down just over 50% in April alone. That’s because of a “risk-off” tone in markets - the spike in VIX and widening in credit spreads have driven the dramatic worsening in macro conditions.
On this occasion, the market initially moved quicker than macro, but the subsequent de-rating in macro has been savage. Even if markets bounce near term (and any recovery in risk appetite lifts eyeQ model value), the stock is highly dependent on equity market volatility calming down and credit markets behaving well.
That means this is a name that will be vulnerable to further headline shocks. Again, this is not a signal. More to flag as a useful gauge of market sentiment going forward. Both Delta and American Airlines Group Inc (NASDAQ:AAL) have already lowered profit expectations. DAL’s earnings update will be a good barometer of how bad any economic fall-out will be.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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Disclosure
We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.
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