Morgan Stanley Direct Lending Fund (MSDL) AI Stock Analysis

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Morgan Stanley Direct Lending Fund

(NYSE:MSDL)

Rating:80Outperform

Price Target:―

Morgan Stanley Direct Lending Fund has a solid financial foundation with strong revenue growth and an appealing valuation. Despite recent cash flow challenges and declining net investment income, the company's strategic positioning and high dividend yield enhance its attractiveness. The neutral technical indicators suggest a stable price trend, while the positive earnings call outlook supports future potential, warranting a strong overall score.

Positive Factors

Financial Performance

MSDL reported NOI of $0.66, ahead of the estimate and last quarter's performance, as leverage continues to ramp and repays build upon its top-line impact.

Market Position

MSDL was lead or co-lead on 90% of its deals during the quarter, which were concentrated in the 475 / 500 spread context.

Negative Factors

Credit Impact

Credit consumed approximately $0.06 of NAV, as a previously recognized loss on Matrix was realized.

Morgan Stanley Direct Lending Fund (MSDL) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$1.70B

Dividend Yield10.26%

Average Volume (3M)375.19K

Price to Earnings (P/E)8.9

Beta (1Y)0.56

Revenue Growth8.41%

EPS Growth-22.34%

CountryUS

EmployeesN/A

SectorGeneral

Sector StrengthN/A

IndustryFinancial - Conglomerates

Share Statistics

EPS (TTM)0.52

Shares Outstanding87,146,280

10 Day Avg. Volume247,489

30 Day Avg. Volume375,191

Financial Highlights & Ratios

PEG Ratio-1.64

Price to Book (P/B)0.90

Price to Sales (P/S)0.00

P/FCF Ratio-16.80

Enterprise Value/Market Cap0.93

Enterprise Value/Revenue1.09

Enterprise Value/Gross Profit5.46

Enterprise Value/Ebitda1.40

Forecast

1Y Price Target

$19.90

Price Target Upside2.10% Upside

Rating ConsensusHold

Number of Analyst Covering5

Morgan Stanley Direct Lending Fund Business Overview & Revenue Model

Company DescriptionMorgan Stanley Direct Lending Fund is a business development and finance company, which engages in lending to middle-market companies. It invests in directly originated senior secured term loans including first lien senior secured term loans and second lien senior secured term loans. The company was founded on May 30, 2019 and is headquartered in New York, NY.

How the Company Makes MoneyMSDL generates revenue through interest income and fees associated with the loans and credit facilities it provides to middle-market businesses. The fund typically charges interest on the principal amount of loans extended to borrowers, which is a primary source of income. Additionally, MSDL may earn arrangement fees, commitment fees, and other transaction-based fees for structuring and managing these financing deals. Strategic partnerships with private equity firms and other financial institutions can enhance deal flow and optimize capital allocation, further contributing to the fund's profitability. The performance of MSDL is also influenced by the creditworthiness of its borrowers and broader economic conditions impacting the middle-market sector.

Morgan Stanley Direct Lending Fund Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: 1.19%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted several positive aspects such as strong net investment income, increased new investment commitments, and a significant milestone in committed capital. Challenges included a decrease in net investment income due to expired fee waivers and credit spread widening impacting unrealized losses. The uncertainty surrounding tariffs affecting M&A activity also posed a challenge. Overall, the positives and negatives appear to be balanced.

Q1-2025 Updates

Positive Updates

Strong Net Investment Income

Morgan Stanley Direct Lending generated strong operating results with net investment income of $0.52 per share, exceeding the $0.50 dividend declared.

Increase in New Investment Commitments

The first quarter saw new investment commitments totaling approximately $233 million, marking a meaningful increase in gross deployment relative to the prior quarter.

Sponsor-Backed Business Milestone

Morgan Stanley Direct Lending's sponsor-backed direct lending business in North America surpassed $20 billion in committed capital.

Diverse Portfolio Composition

The portfolio comprised 96% first lien debt with significant exposure to software and insurance services sectors, which accounted for 19.5% and 12% of the portfolio at fair value, respectively.

Low Non-Accrual Rate

Non-accruals remained minimal at just 20 basis points of the portfolio at cost, with one portfolio company removed from non-accrual status during the quarter.

Negative Updates

Credit Spread Widening Impact

The net change in unrealized losses was $17 million for the first quarter, driven in part by credit spread widening within the secondary market.

Decline in Net Investment Income

Net investment income for the first quarter decreased to $46.2 million or $0.52 per share, compared to $50.7 million or $0.57 per share from the prior quarter, partly due to the expiration of IPO-related fee waivers.

Impact of Tariff Volatility

Tariff-driven volatility has delayed the anticipated recovery in M&A activity, leading to subdued LBO activity as private equity firms await more clarity.

Company Guidance

During the first quarter of 2025, Morgan Stanley Direct Lending Fund reported a net investment income of $0.52 per share, which exceeded the $0.50 per share dividend declared, driven by strong underlying credit performance with low contributions from payment in kind. New investment commitments totaled approximately $233 million, representing a significant increase in gross deployment compared to the previous quarter, with repayments amounting to $202 million. The fund's debt to net asset value (NAV) ratio modestly increased from 1.08 times to 1.11 times. The portfolio ended the quarter with a net fair value of $3.8 billion, composed of 96% first lien debt. The average yield on debt and income-producing investments was 10.2% at cost and 10.3% at fair value. The fund's net change in unrealized losses was $17 million due to credit spread widening in the secondary market. Additionally, Morgan Stanley Direct Lending Fund's NAV per share decreased slightly to $20.65 from $20.81 in the prior period. The company declared a regular distribution of $0.50 per share for the second quarter of 2025 and established a $300 million at-the-market equity issuance program to raise capital efficiently under supportive market conditions.

Morgan Stanley Direct Lending Fund Financial Statement Overview

Summary

Morgan Stanley Direct Lending Fund shows strong revenue growth and a robust balance sheet with no debt, indicating solid financial health. However, challenges include volatile EBIT margins and recent cash flow issues, suggesting a need for improved operational efficiency and cash management.

Income Statement

Very Positive

Morgan Stanley Direct Lending Fund has shown robust growth in total revenue over the years, with a significant increase from $24 million in 2020 to $253 million in 2024. The net profit margin has also remained strong, with net income consistently climbing, indicating effective cost management and profitability. However, the EBIT and EBITDA margins have been volatile, with EBIT at zero in 2024, which could indicate challenges in operational efficiency.

Balance Sheet

Very Positive

The company maintains a strong financial position with zero total debt in 2024, indicating exceptional financial stability. The equity ratio remains solid, suggesting prudent financial management. However, the return on equity has been fluctuating, reflecting variable profitability relative to shareholder equity.

Cash Flow

Positive

The cash flow statement shows mixed results. While the company has maintained positive free cash flow in previous years, 2024 saw a significant negative free cash flow, pointing to potential liquidity issues. The operating cash flow to net income ratio has also been negative recently, indicating discrepancies between earnings and cash generation.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
253.06M	366.34M	230.80M	121.63M	24.06M
	Gross Profit
253.06M	316.51M	199.92M	100.50M	19.64M
	EBIT
0.00	155.26M	102.59M	156.37M	32.76M
	EBITDA
0.00	343.90M	217.66M	104.27M	22.02M
	Net Income Common Stockholders
215.56M	231.01M	48.54M	83.25M	18.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
72.37M	69.70M	81.22M	74.15M	11.26M
	Total Assets
3.91B	3.31B	2.99B	2.49B	656.81M
	Total Debt
0.00	53.00K	40.00K	268.00K	198.00K
	Net Debt
-70.37M	-69.65M	-81.17M	-73.89M	-11.06M
	Total Liabilities
2.07B	1.59B	71.00K	57.00K	15.00K
	Stockholders Equity
1.84B	1.72B	2.99B	2.49B	656.81M
Cash Flow		Free Cash Flow
-373.54M	185.78M	121.59M	67.69M	12.43M
	Operating Cash Flow
-373.54M	185.78M	121.59M	67.69M	12.43M
	Investing Cash Flow
0.00	-269.60M	-551.43M	-1.73B	-625.78M
	Financing Cash Flow
376.19M	72.31M	436.90M	1.72B	624.58M

Morgan Stanley Direct Lending Fund Technical Analysis

Technical Analysis Sentiment

Negative

Last Price19.49

Price Trends

50DMA

19.41

Positive

100DMA

19.80

Negative

200DMA

19.54

Negative

Market Momentum

MACD

0.04

Positive

RSI

47.95

Neutral

STOCH

44.30

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MSDL, the sentiment is Negative. The current price of 19.49 is below the 20-day moving average (MA) of 19.57, above the 50-day MA of 19.41, and below the 200-day MA of 19.54, indicating a neutral trend. The MACD of 0.04 indicates Positive momentum. The RSI at 47.95 is Neutral, neither overbought nor oversold. The STOCH value of 44.30 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 3 New Risks

Our investments in securities or assets of publicly traded companies are subject to the risks inherent in investing in public companies. Q4, 2024

Holders of any preferred stock that we may issue will have the right to elect certain members of our Board of Directors and have class voting rights on certain matters. Q4, 2024

Our investments in OID and PIK instruments may expose us to investment risk. Q4, 2024

Morgan Stanley Direct Lending Fund Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSDL	80 Outperform	$1.70B	8.93	10.59%	10.26%	8.41%	-22.34%
NCDL	75 Outperform	$805.00M	8.52	10.56%	11.23%	37.08%	-2.29%
IBTA	69 Neutral	$1.42B	27.84	26.94%	―	14.75%	77.59%
Sector *	57 Neutral	$4.97B	19.52	-16.90%	5.27%	13.58%	-28.18%
TREE	55 Neutral	$480.36M	―	-46.84%	―	51.96%	60.33%
PSBD	54 Neutral	$450.31M	27.55	3.05%	11.65%	1.13%	-86.09%
PACS	51 Neutral	$1.58B	―	117.42%	―	―	―

* General Sector Average

Performance Comparison

MSDL

Morgan Stanley Direct Lending Fund

19.43

-1.37

-6.59%

TREE

Lendingtree

35.09

-9.47

-21.25%

PSBD

Palmer Square Capital BDC Inc.

13.86

-0.90

-6.10%

NCDL

Nuveen Churchill Direct Lending Corp.

16.09

0.19

1.19%

PACS

PACS Group Inc

10.36

-19.47

-65.27%

IBTA

Ibotta, Inc. Class A

48.16

-29.61

-38.07%

Morgan Stanley Direct Lending Fund Corporate Events

Financial Disclosures

Morgan Stanley Direct Lending Fund Q1 Results Announcement

Neutral

Apr 8, 2025

On April 8, 2025, Morgan Stanley Direct Lending Fund announced it will release its first quarter financial results for the period ending March 31, 2025, on May 8, 2025, after market close. The company will hold an earnings call on May 9, 2025, to discuss these results, potentially impacting stakeholders’ insights into its financial health and operations.

Spark’s Take on MSDL Stock

According to Spark, TipRanks’ AI Analyst, MSDL is a Outperform.

Morgan Stanley Direct Lending Fund shows strong financial stability with zero debt and a solid revenue base. Despite recent cash flow challenges and operational efficiency issues, the stock’s attractive valuation and positive technical indicators support a favorable outlook. Management’s confidence in navigating future challenges and opportunities further bolsters the stock’s potential.

To see Spark’s full report on MSDL stock, click here.

DividendsFinancial Disclosures

Morgan Stanley Direct Lending Fund Reports Q4 2024 Results

Neutral

Feb 27, 2025

On February 27, 2025, Morgan Stanley Direct Lending Fund announced its financial results for the fourth quarter and fiscal year ending December 31, 2024. The company reported a net investment income of $50.7 million, a decrease from the previous quarter, and declared a regular dividend of $0.50 per share for the first quarter of 2025. The fund’s investment portfolio had a fair value of approximately $3.8 billion, with a debt-to-equity ratio of 1.08x as of December 31, 2024. The announcement highlights the company’s ongoing commitment to providing shareholder value despite a slight decrease in net investment income and an increase in net expenses.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.