Investors should stay away from Activision Blizzard while the company deals with an ongoing controversy surrounding reports and allegations about its CEO, according to JPMorgan. The Wall Street Journal reported earlier this week that CEO Bobby Kotick failed to inform the board of directors about sexual misconduct allegations at the company. Activision Blizzard called the report inaccurate, but employees held a walkout on Tuesday demanding change . The stock fell 9% over Tuesday and Wednesday. JPMorgan analyst Alexia Quadrani downgraded Activision Blizzard to neutral from overweight, saying that the controversy would keep the stock from rebounding. "While we are reluctant to downgrade after the stock has already underperformed (-23% over the prior 3 months vs. S & P +5%), and we still have longer-term conviction in its pipeline and brands, we think recent negative headlines introduce a significant amount of uncertainty into this story," Quadrani wrote. JPMorgan lowered its price target on the stock to $88 per share from $100. The stock, which traded above $100 per share earlier this year, closed at $64.20 on Wednesday. The board of directors released a statement supporting Kotick on Tuesday, so the company appears unlikely to make a management change to address the controversy. That could overshadow a strong underlying business, JPMorgan said. "We remain positive on the company's core games and pipeline, and in a vacuum still like the risk/reward, with the stock trading on a 15x trough multiple against this year's guided EPS of $3.76. However, we don't expect shares can outperform until there is clarity on this issue," the note said. -CNBC's Michael Bloom contributed to this report.
Activision Blizzard CEO Bobby Kotick speaks at the CNBC Evolve conference November 19th in Los Angeles.
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