JPMorgan: Despite A $2 Billion Drop In Market Cap, Wynn Resorts Is A Risky Bet Right Now

Wynn Resorts, Limited WYNN shares are now in their second session of freefall following accusations of sexual misconduct against Founder and CEO Steve Wynn.

Wynn Resorts has lost over $2 billion in market cap since the Wall Street Journal published the allegations. Wynn was one of the 10 best-performing stocks in 2017.

JPMorgan analyst Joseph Greff issued an alert on Wynn after receiving a large number investor inquiries asking about the future trajectory of the company.

Despite the recent drop, the risk-reward on Wynn is unfavorable, the analyst said. (See Greff's track record here.)

No sizable upside opportunity exists until the company reaches the $150-per-share level, he said. JPMorgan maintained a Neutral rating and a $200 price target on Wynn. At last check, shares were trading down 7.70 percent at $166.40. 

The allegations could be "very serious" for the company, given that the highly regulated gaming industry has character clauses in its licenses, Greff said. The Nevada and Massachusetts gaming commission have both announced they are launching reviews. Wynn is expected to open a Boston casino in 2019.

“A scenario where WYNN doesn’t have Steve as a CEO is not good for the company. We have always held the belief that WYNN possesses the single largest individual CEO dependency versus any of the other 30 gaming and lodging companies in our coverage universe,” the analyst said. 

Wynn, whose name is synonymous with every resort the company holds, has arguably the best assets in the industry and his name alone gives the company a premium multiple. If the company were to change its CEO and valuation suffered, it will attract the attention of other gaming operators with the industry that are in consolidation mode, Greff said. 

“Who could find WYNN appealing and has the size and financial wherewithal to do so? In our view, there [are] a number of global large cap operators, also gaming REITS and gaming licensed private equity firms.”

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Photo courtesy of Wynn Resorts.