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Morgan Stanley Direct Lending Fund
(NYSE:MSDL)
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Rating:71Outperform
Price Target:
$17.00
▲(10.68% Upside)
Action:Reiterated
Date:07/10/26
The score is primarily driven by strong financial performance—high profitability and solid cash conversion—tempered by margin compression and balance-sheet variability. Valuation is supportive due to the very high dividend yield alongside a mid-range P/E, while technicals are neutral-to-constructive. Earnings-call takeaways are mixed: strong portfolio defensiveness and capital management are offset by rate-driven NII pressure and a distribution reduction; recent funding events modestly strengthen the outlook through improved financing flexibility.
Positive Factors
Strong cash generation & high margins
Consistent TTM operating and free cash flow near $220M with strong EBIT/net margins indicates durable earnings-to-cash conversion. This supports stable distributions, buybacks, and JV funding capacity, providing long-term flexibility to weather credit cycles and fund originations without relying solely on external financing.
Negative Factors
Rate-driven NII pressure & distribution cut
A sustained decline in portfolio yields and lower short‑term rates can compress net investment income over several quarters. The 10% distribution reduction signals management aligning payouts with normalized earnings, which may constrain shareholder cash returns and reduce retained capital available for reinvestment and balance‑sheet strengthening.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong cash generation & high margins
Consistent TTM operating and free cash flow near $220M with strong EBIT/net margins indicates durable earnings-to-cash conversion. This supports stable distributions, buybacks, and JV funding capacity, providing long-term flexibility to weather credit cycles and fund originations without relying solely on external financing.
Read all positive factors
Morgan Stanley Direct Lending Fund (MSDL) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.34B
Dividend Yield12.6%
Average Volume (3M)516.86K
Price to Earnings (P/E)15.3
Beta (1Y)0.56
Revenue Growth-11.06%
EPS Growth-53.49%
CountryUS
EmployeesN/A
SectorFinancial
Sector Strength70
IndustryFinancial - Conglomerates
Share Statistics
EPS (TTM)1.01
Shares Outstanding84,764,710
10 Day Avg. Volume372,562
30 Day Avg. Volume516,864
Financial Highlights & Ratios
PEG Ratio-0.28
Price to Book (P/B)0.82
Price to Sales (P/S)3.72
P/FCF Ratio9.53
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$15.58Price Target Upside1.45% Upside
Rating ConsensusHold
Number of Analyst Covering3
EPS Forecast (FY)1.84
Revenue Forecast (FY)$361.32M
Morgan Stanley Direct Lending Fund Business Overview & Revenue Model
Company Description
Morgan Stanley Direct Lending Fund functions as a business development company (BDC) specializing in finance, primarily providing capital to mid-sized enterprises. Its investment strategy focuses on directly originating and funding senior secured ...
How the Company Makes Money
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Morgan Stanley Direct Lending Fund Earnings Call Summary
Earnings Call Date:Feb 26, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Aug 06, 2026
Earnings Call Sentiment Positive
The call highlighted strong execution on capital management and origination (CLO, JV, refinancings, repurchase program), a large and defensively structured first‑lien portfolio, and stable spreads driven by disciplined underwriting. Offsetting these positives were near-term headwinds from lower base rates (yield down ~40 bps), a modest decline in NII ($0.49 vs $0.50 prior quarter), a 10% distribution reduction to $0.45, small realized/unrealized losses ($13.7M) and a modest uptick in nonaccruals concentrated in a few sectors. Management emphasized confidence in portfolio quality and gradual accretion from the JV, while acknowledging rate‑driven earnings pressure that will be monitored.Positive Updates
Solid Operating Performance and Earnings Quality
Net investment income of $42.4M or $0.49 per share in Q4 2025 (vs. $0.50 in prior quarter). Earnings quality remained high with limited contribution from PIK and other non-cash income.
Negative Updates
Distribution Reduction
Board declared Q1 2026 distribution of $0.45 per share, a $0.05 (10%) reduction from the prior quarter's $0.50 distribution—adjusted to align with normalization of short-term interest rates.
Read all updates
Q4-2025 Updates
Positive
Negative
Solid Operating Performance and Earnings Quality
Net investment income of $42.4M or $0.49 per share in Q4 2025 (vs. $0.50 in prior quarter). Earnings quality remained high with limited contribution from PIK and other non-cash income.
Read all positive updates
Company Guidance
The company guided to a Q1 2026 regular distribution of $0.45 per share (a $0.05 reduction), implying roughly a 9% yield on NAV, and said the payout is intended to be durable though the Board may reassess over time (including a potential year‑end special if excess income exists); key metrics at quarter‑end included $3.8B portfolio at fair value, $3.9B total assets, $1.75B net assets, NAV $20.26 (down from $20.41), spillover ~$0.85, Q4 net investment income $42.4M ($0.49 per share), total investment income $96.6M, PIK income 3.9% of income (down 20 bps), expenses $54.2M, net unrealized/realized losses $13.7M, nonaccruals 160 bps, 227 portfolio companies across 35 industries, 96% first‑lien, weighted average LTV ~40%, median EBITDA $90M, weighted average yield on debt 9.3% at cost (9.5% at fair value, ~40 bps q/q decline), debt/equity 1.20x (unsecured 54% of funded debt), $146M new commitments in the quarter (17 new companies), $164M fundings vs $163M repayments, ~$9M repurchased in Q4 and a renewed $100M buyback program, weighted average spreads on new deployment mid‑ to high‑400 bps, and the newly launched JV (MSDL committed $200M of up to $250M equity, ~47% called) with $372.8M of commitments across 51 companies, a $500M credit facility and a target to scale to ~$700M of assets over ~4–6 quarters — the JV is nearly 50% ramped and expected to be accretive to NII over time; management also signaled spread stability, a deceleration in yield contraction and additional Fed easing as key drivers of near‑term NII dynamics.Morgan Stanley Direct Lending Fund Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
67
Positive
Cash Flow
72
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 299.71M | 386.99M | 332.52M | 328.13M | 100.22M | 98.62M |
| Gross Profit | 198.87M | 313.57M | 209.59M | 215.25M | 33.03M | 77.61M |
| EBITDA | 152.53M | 258.23M | 218.00M | 232.53M | 48.88M | 83.33M |
| Net Income | 87.91M | 122.09M | 215.56M | 231.01M | 48.54M | 83.25M |
Balance Sheet | ||||||
| Total Assets | 3.82B | 3.92B | 3.91B | 3.31B | 2.99B | 2.49B |
| Cash, Cash Equivalents and Short-Term Investments | 96.69M | 81.43M | 70.37M | 69.70M | 81.22M | 74.15M |
| Total Debt | 2.05B | 2.09B | 1.97B | 1.50B | 1.52B | 1.25B |
| Total Liabilities | 2.13B | 2.17B | 2.07B | 1.59B | 1.59B | 1.30B |
| Stockholders Equity | 1.69B | 1.75B | 1.84B | 1.72B | 1.40B | 1.19B |
Cash Flow | ||||||
| Free Cash Flow | 219.91M | 150.90M | 201.47M | 185.78M | 121.59M | 67.69M |
| Operating Cash Flow | 219.91M | 150.90M | 201.47M | 185.78M | 121.59M | 67.69M |
| Investing Cash Flow | 1.66M | 0.00 | -575.01M | -269.60M | -551.43M | -1.73B |
| Financing Cash Flow | -182.95M | -132.90M | 376.19M | 72.31M | 436.90M | 1.72B |
Morgan Stanley Direct Lending Fund Technical Analysis
Positive
15.36
Price Trends
14.98
Positive
14.56
Positive
14.94
Positive
Market Momentum
0.20
Negative
64.18
Neutral
77.75
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MSDL, the sentiment is Positive. The current price of 15.36 is above the 20-day moving average (MA) of 15.17, above the 50-day MA of 14.98, and above the 200-day MA of 14.94, indicating a bullish trend. The MACD of 0.20 indicates Negative momentum. The RSI at 64.18 is Neutral, neither overbought nor oversold. The STOCH value of 77.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MSDL.
Morgan Stanley Direct Lending Fund Risk Analysis
Morgan Stanley Direct Lending Fund disclosed 96 risk factors in its most recent earnings report. Morgan Stanley Direct Lending Fund reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Morgan Stanley Direct Lending Fund Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $641.54M | 10.58 | 6.76% | 14.71% | -12.61% | -36.66% | |
71 Outperform | $1.34B | 15.35 | 5.02% | 12.60% | -11.06% | -53.49% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
61 Neutral | $7.22B | 29.76 | 26.63% | ― | 20.90% | 243.93% | |
57 Neutral | $381.17M | -64.28 | 4.10% | ― | 11.49% | -57.82% | |
54 Neutral | $312.14M | -9.45 | -0.03% | 14.10% | -14.06% | -306.26% |
* Financial Sector Average
MSDL
Morgan Stanley Direct Lending Fund
15.46
-1.98
-11.34%
PSBD
Palmer Square Capital BDC Inc.
9.83
-2.39
-19.55%
NCDL
Nuveen Churchill Direct Lending Corp.
12.69
-2.31
-15.41%
AUNA
Auna S.A. Class A
5.12
-1.23
-19.37%
PACS
PACS Group Inc
46.13
34.17
285.70%
GPAT
GP-Act III Acquisition Corporation Class A
11.04
0.48
4.60%
Morgan Stanley Direct Lending Fund Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Morgan Stanley Direct Lending Fund Issues New Unsecured Notes
Positive
Jul 9, 2026
On July 9, 2026, Morgan Stanley Direct Lending Fund issued $350 million of 6.100% unsecured notes due July 15, 2031 under a supplemental indenture with U.S. Bank Trust Company, National Association, with interest payable semi-annually starting Jan...
Business Operations and StrategyFinancial Disclosures
Morgan Stanley Direct Lending Fund Plans Q2 Results
Neutral
Jul 6, 2026
On July 6, 2026, Morgan Stanley Direct Lending Fund announced plans to release financial results for the second quarter ended June 30, 2026, after the market close on August 6, 2026. The business development company will follow the earnings public...
Business Operations and StrategyPrivate Placements and Financing
Morgan Stanley Direct Lending Issues New 2031 Notes
Positive
Jul 1, 2026
On June 29, 2026, Morgan Stanley Direct Lending Fund entered into an underwriting agreement with MS Capital Partners Adviser Inc. and a syndicate of investment banks to issue and sell $350 million of 6.100% notes due 2031. The deal, conducted unde...
Executive/Board ChangesShareholder Meetings
Morgan Stanley Direct Lending Fund Shareholders Back Board, Auditor
Positive
Jun 2, 2026
On June 1, 2026, Morgan Stanley Direct Lending Fund held its 2026 annual meeting of stockholders, with 51,663,943 of 85,261,312 eligible shares represented, establishing a quorum and underscoring solid shareholder engagement. Stockholders elected ...
Executive/Board Changes
Morgan Stanley Direct Lending Fund Announces Officer Resignation
Neutral
May 29, 2026
On May 26, 2026, Morgan Stanley Direct Lending Fund announced that Jonathan Frohlinger resigned as the company’s Principal Accounting Officer, effective the same day. The company stated that his departure did not arise from any disagreement ...
Business Operations and StrategyDividendsFinancial DisclosuresPrivate Placements and Financing
Morgan Stanley Direct Lending Declares Quarterly Cash Distribution
Neutral
May 7, 2026
Morgan Stanley Direct Lending Fund, a New York–listed business development company focused on middle-market direct lending, reported first-quarter 2026 results showing net investment income of $40.5 million, or $0.47 per share, down slightly...
Business Operations and StrategyPrivate Placements and Financing
Morgan Stanley Direct Lending Extends Key Revolving Credit Facility
Positive
Apr 27, 2026
Morgan Stanley Direct Lending Fund, a direct lender to middle-market borrowers, has amended its senior secured revolving credit facility with Truist Bank and a syndicate of lenders, refining the terms of a key funding source for its lending activi...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.