Street Fight: Analysts split on Wynn Resorts after CEO steps down
Last night, Wynn Resorts (WYNN) announced that Steve Wynn had resigned as the company CEO amid sexual misconduct allegations. Wynn had previously stepped down from his post as GOP finance chief after The Wall Street Journal published an article with detailed allegations of decades of sexual misconduct by the gambling mogul. Following the news, JPMorgan analyst Joseph Greff upgraded Wynn Resorts to Overweight on reduced regulatory risk, while his peer at Roth Capital downgraded the stock to Neutral saying the company removed "a visionary, not an overhang." STEPPING DOWN AS CEO: Wynn Resorts announced that its board "reluctantly" accepted the resignation of Steve Wynn as CEO and Chairman of the board. The board has appointed Matt Maddox, currently President of the company, as its CEO, and Boone Wayson as Non-Executive Chairman of the board, effective immediately. BUY WYNN: Following the announcement, JPMorgan's Greff upgraded Wynn Resorts to Overweight from Neutral, while lowering his price target on the shares to $196 from $200. The analyst told investors he sees a more favorable risk/reward profile following the resignation of Steve Wynn. While the immediate impact to shares could be volatile, Greff argued that the resolution could have two outcomes with limited downside and "solid upside," namely best-in-class assets positioned in premium markets and prospective interest from acquirers. Nonetheless, the analyst acknowledged that Wynn's value to the company is "unarguably profound" as its chief visionary and diplomat and as such, the company may not grow at the same trajectory nor can it maintain its cutting-edge position. Given the reduced value implied for Wynn Resorts going forward, a sale of the assets could prove more valuable, he contended. Meanwhile, his peer at Nomura Instinet also upgraded Wynn Resorts to Buy from Neutral, raising the price target on the shares to $211 from $175. Analyst Harry Curtis told investors in a research note of his own that he now sees the company as a breakup/acquisition target. Morgan Stanley analyst Thomas Allen also commented on the news, saying that while Steve Wynn's resignation removes the founder and "driving force" behind the company, it is a first step toward mitigating the license loss risk and the beginning of removing the overhang that has been on the shares. The analyst, who does not believe there is a plan in place for Wynn to sell any of his roughly 12% stake at this point, reiterated an Overweight rating on the shares. MOVING TO THE SIDELINES: Roth Capital analyst David Bain was not as bullish on Wynn Resorts following its CEO departure, and downgraded the stock to Neutral from Buy. The analyst argued that Steve Wynn's resignation is unlikely to shift investor discussions to fundamentals. Instead, he believes it raises additional questions on potential risks and simultaneously "removes one of, if not the greatest, hospitality leaders and visionaries" from a company he created and "actively and intimately molds on a daily basis." The "Steve Wynn valuation premium" will take years to recoup, he contended. Bain also lowered his price target on the shares to $170 from $210. PRICE ACTION: In morning trading, shares of Wynn Resorts have gained almost 8% to $175.71.