Keefe, Bruyette & Woods has lowered its price target for Sixth Street Specialty Lending (NYSE: TSLX) to $22.00 from $23.00, while maintaining an Outperform rating on the business development company. The research firm pointed to a mixed quarterly performance characterized by depreciation that weighed on net asset value.
Despite the NAV pressure, the company posted results that outpaced analyst projections and showed sound credit metrics. The firm noted that earnings exceeded expectations and that credit quality remains solid. External data also shows the company retains a "GOOD" overall financial health score of 2.85, though the stock has declined 11.46% year-to-date.
Operationally, Sixth Street Specialty Lending announced formation of a joint venture that will invest in BSL collateralized loan obligations - or BSL CLOs - and will not levy fees at the asset level. According to the research note, the joint venture will be implemented gradually and is expected to generate a yield in the mid-teens as it scales.
Looking ahead, the company provided return on equity guidance of 11.0% to 11.5% for 2026. Keefe, Bruyette & Woods highlighted the company faces fewer refinancing pressures than many peers because 100% of its liabilities are floating rate, reducing near-term debt refinancing headwinds relative to the broader sector.
The analyst also flagged a potential sensitivity to headlines tied to software and AI-related risk given the firm's elevated exposure in those areas. Following a review of the quarter and its portfolio exposures, Keefe, Bruyette & Woods reduced its estimates and adjusted the price target downward to $22.00.
In its most recent reported quarter - the fourth quarter of 2025 - Sixth Street Specialty Lending delivered earnings that surpassed analyst expectations. The company reported earnings per share of $0.53, versus the consensus forecast of $0.51, representing a 3.92% beat. Revenue for the quarter reached $108.2 million, above the anticipated $106.57 million.
Those results underline the company’s ability, in this period, to exceed market forecasts on both EPS and top-line revenue, while simultaneous NAV pressure from depreciation and targeted exposures prompted the analyst to trim forecasts and the price target.
Keefe, Bruyette & Woods' combination of a maintained Outperform rating with a reduced price target reflects a mixed assessment: the firm recognizes operational strengths and solid credit quality, while also responding to NAV impacts and concentration-sensitive headline risk. The joint venture strategy and 2026 ROE guidance provide additional context for the analyst revisions.
Summary
Keefe, Bruyette & Woods cut Sixth Street Specialty Lending’s price target to $22.00 from $23.00 but kept an Outperform rating after a quarter where depreciation pressured net asset value despite earnings and revenue beats and steady credit quality. The company set 2026 ROE guidance, formed a fee-free-at-asset-level joint venture for BSL CLOs, and benefits from having fully floating-rate liabilities.