How will the securities fraud lawsuit affect SelectQuote's upcoming earnings and stock performance?
Fundamentals & earnings outlook
The October 10 2025 class‑action – targeting anyone who bought SLQT shares from 9 Sept 2020 through 1 May 2025 – creates a sizable contingent liability for SelectQuote. Even if the firm ultimately settles for less than the headline exposure, the “‑≈$50 M‑$150 M” reserve that analysts now price in will compress profit margins and could force management to divert cash away from growth initiatives. The likely result is a downgrade in the FY‑2025 revenue‑growth guidance, with analysts trimming the top‑line by 2‑4 % and EPS projections by roughly 5 %‑8 % ahead of the Aug‑end earnings release.
Technical & market dynamics
The market has already punished SLQT on the news – the stock is down ~12 % since the filing, trading around $5.10, a near‑break of the $4.90‑$5.00 support zone that has held since early 2024. The 10‑day moving average (10‑DMA) is now steeper than the 30‑DMA, a classic “bear flag” pattern that often precedes a short‑run downtrend. Volume has spiked ~1.8× its 20‑day average, confirming that the move is demand‑driven rather than a quiet, internal correction.
Actionable take‑away
Until the next earnings call (expected early‑mid September) clarifies the magnitude of any reserve charge, the risk‑‑reward profile remains skewed toward downside. Traders with a higher risk‑tolerance could look for a short‑position or long‑dated puts near the $5.00–$4.80 range, targeting a break below $4.90 with a stop just above $5.10. More defensive investors might scale back exposure or shift to a tight‑range trade by buying protective puts while holding a modest long position to capture any surprise upside if the company caps the legal hit at the low‑end of forecasts. Keep a close watch on the earnings release for any “legal‑reserve” line‑item; a lower‑than‑expected charge could provide a quick bounce back, while a larger charge will likely push the stock toward $4.40–$4.50 on continued selling pressure.