On Monday, Raymond James adjusted its rating on Morgan Stanley Direct Lending (NYSE:MSDL) stock, moving from Outperform to Market Perform.
The firm's analyst cited the current valuation of the stock, which trades at a modest premium to its net asset value (NAV), as being fair. However, the analyst noted limited potential for upside, particularly with the first lock-up expiration on the horizon.
Morgan Stanley Direct Lending reported a first-quarter net investment income (NII) of $0.63 per share, marginally below the core estimate of $0.64 and the consensus of $0.65.
The slight discrepancy was attributed to a technical reason; the company has altered its approach to excise tax accruals, now distributing them throughout the year instead of in the fourth quarter as done in previous years. This change accounted for $400,000 of the $600,000 NII shortfall compared to projections.
The NAV per share for Morgan Stanley Direct Lending stood at $20.67, unchanged from the prior quarter. This stability in NAV comes despite the challenges of deploying capital in what has been described as an overall slow market. The firm's established relationships have been a key factor in allowing capital deployment during this period.
Raymond James' downgrade reflects a viewpoint that while Morgan Stanley Direct Lending's recent quarter did not present any negative surprises, the stock's valuation is seen as balanced with the current prospects. The analyst's comments suggest that the company's financial performance aligns closely with market expectations.
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