Wall Street firms are telling their clients Wynn Resorts (NASDAQ: WYNN) shares may have more downside even after the company stock's large drop since Friday.
Wynn shares fell 10% on Friday after The Wall Street Journal reported allegations that its CEO Steve Wynn engaged in sexual misconduct over a course of many years.
The shares were down $15.61, or another 8.7%, Monday to $164.68 per share after several negative research reports on the company and concerns over potential regulatory action.
J.P. Morgan analyst Joseph Greff said on Sunday he does not recommend the shares due to the uncertainty over the scandal.
"Our instinct here is that the risk-reward is not favorable, at least yet," he wrote. "We think the news reports alleging sexual harassment by Steve Wynn creates a sizable overhang in the shares and see value that compensates investors for risk related to these allegations at the $150 level."
The analyst reiterated his neutral rating for Wynn shares, noting the importance of the executive to the company and brand.
"A scenario where WYNN doesn't have Steve as a CEO is not good for the company," he wrote. "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 our coverage universe."
UBS lowered its rating for Wynn Resorts to neutral from buy on Monday, citing the rising scrutiny from regulatory bodies.
Macau's Gaming Inspection & Coordination Bureau has contacted Wynn management on whether major shareholders, directors and key employees meet suitable qualifications, according to a Bloomberg News report.
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