Morgan Stanley: Our Bullish Wynn Resorts Thesis No Longer Applies

Shares of Wynn Resorts, Limited (NASDAQ: WYNN) have gained around 75 percent over the past year, even when including a sharp sell-off in the stock after sexual assault accusations against its CEO Steve Wynn, who resigned Tuesday. Now is a good time for investors to sell the stock, according to Morgan Stanley.

The Analyst

Morgan Stanley's Thomas Allen downgraded Wynn Resorts from Overweight to Equal-weight with an unchanged $193 price target.

The Thesis

The upside to Wynn Resorts' stock over the past year has been based on optimism in the Macau market, Allen said in the downgrade note. But after the stock's strong performance over the past year, it would be hard for the stock to realize similar upside moving forward after the Macau thesis has mostly played out, the analyst said. 

Looking forward, there are now five notable risks for Wynn that justify dropping a bullish stance, Allen said:

• Market share gains in Macau and Las Vegas will be "more difficult" to see after Wynn's resignation.
• Wynn's former business partner Kazuo Okada can now proceed in a legal claim against Wynn, although a worse-than-expected outcome has a "low probability but high risk."
• Wynn's position as a shareholder may prove to be "problematic" for regulators.
• Hong Kong stock exchange rules make a potential acquisition of Wynn Resorts somewhat problematic.
• Wynn Resorts isn't the only company with exposure to Macau and other names offer attractive dividend yields.

Price Action

Shares of Wynn Resorts were trading lower by 1.3 percent early Friday morning.

Related Links:

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