What is the potential financial exposure from the class action and how might it affect Charter's earnings?

Potential exposure & earnings impact

Robbins LLP’s filing signals that Charter could be on the hook for a multi‑million‑dollar settlement or judgment. Most securities‑class actions against telecom peers have ultimately resulted in payouts ranging from $50 million to $150 million, depending on the size of the alleged misstatement and the number of claimants. Even at the low end, a $50 million outflow would represent roughly 0.4 % of Charter’s FY‑2025 revenue ($12.6 bn) and would shave ≈$0.08‑$0.10 per share from Q4 and full‑year EPS—enough to dent the company’s guidance cushion and could trigger a downward revision of the FY‑2025 EPS outlook by analysts. Because the lawsuit targets investors who bought shares, bought call options or sold puts, the exposure is not limited to a cash settlement; a sizeable contingent liability will likely be disclosed in the 10‑K footnotes, adding pressure on the balance sheet and possibly prompting the board to set aside a reserve that will be expensed in the quarter the liability is recognized.

Trading implications

The –60 sentiment score and the legal headline have already pushed CHTR below its 200‑day moving average (≈$15.10) and into a descending channel that has held since early August. The stock is testing a key support level near $14.40, coincident with the 50‑day MA and a prior low. A break below this zone would likely open the door to a short‑term rally to $13.80–$13.20, while a bounce off $14.40 with volume could indicate that the market is pricing in a limited settlement and the risk premium is fading.

Actionable take‑away:

- Short‑term bias: Remain short or defensive (e.g., protective puts) until the court or settlement news clarifies the magnitude of the liability.

- Watch triggers: Any filing of a settlement amount, a court‑ordered discovery deadline, or a management commentary on the reserve in the upcoming earnings call (scheduled for early Oct) will be catalysts.

- Risk‑reward: A 2‑3 % upside if the stock rebounds to $15.20‑$15.50 (near the 20‑day MA) versus a potential 6‑8 % downside to $13.80 if the exposure proves larger than market expectations. Adjust position size accordingly and keep stops just below the $14.40 support to protect against a breakout.