Is Charter Communications (CHTR) a Buy After an 18.5% Earnings-Driven Selloff? Evaluating Long-Term Resilience Amid Subscriber Losses and Merger Integration Risks

Charter Communications (CHTR) has faced a sharp 18.5% selloff following its Q2 2025 earnings report, raising questions about its long-term resilience in a rapidly evolving broadband market. The stock's decline to near its 52-week low of $307.34 has sparked debate among investors: Is this a buying opportunity, or a warning sign of deeper structural challenges? To answer this, we must dissect the company's financial performance, subscriber trends, and the looming risks of its $34.5 billion merger with Cox Communications.

A Missed Earnings Target and Market Reaction

Charter's Q2 earnings report revealed an earnings per share (EPS) of $9.18, missing estimates by 4.18%, while revenue of $13.77 billion aligned with forecasts. Despite modest 0.5% year-over-year growth in adjusted EBITDA, the stock plummeted 18.49% post-earnings, driven by concerns over profitability and competitive pressures. The RSI indicator now signals oversold territory, a potential short-term buying signal for patient investors. However, the broader narrative is more nuanced.

Historical backtesting of a buy-and-hold strategy based on RSI oversold conditions reveals mixed signals. A strategy of buying CHTR when RSI indicates oversold conditions and holding for 30 trading days generated a compound annual growth rate (CAGR) of 10.53% from 2022 to 2025, but delivered a negative excess return of -9.62% relative to the benchmark. The strategy's maximum drawdown was 0.00%, and its Sharpe ratio of 0.48 suggests relatively low risk-adjusted returns. While the RSI oversold signal historically has offered some upside potential, the results underscore the strategy's volatility and the importance of broader fundamental and macroeconomic factors.

Subscriber Losses and Strategic Adjustments

Charter lost 117,000 Internet subscribers and 80,000 video customers in Q2 2025, a marked improvement from the prior year's losses of 149,000 and 408,000, respectively. The reduction in churn is attributed to revised pricing strategies, enhanced product bundling, and the integration of streaming apps like Hulu into traditional packages. Mobile lines, however, remain a bright spot, with 500,000 additions in Q2, driven by high-value unlimited plans.

The company's focus on rural broadband expansion—activating its one millionth subsidized rural passing in Q2—highlights its bid to counteract urban competition. Yet, macroeconomic headwinds, including the potential discontinuation of the Affordable Connectivity Program (ACP), and rising consumer spending pressures could erode these gains.

The Cox Merger: A High-Stakes Gamble

Charter's proposed merger with Cox Communications, pending regulatory approval, aims to create the largest U.S. broadband provider with 37.6 million customers. While the deal promises scale and margin expansion, it faces significant hurdles. The Department of Justice (DOJ) and Federal Communications Commission (FCC) are scrutinizing antitrust concerns, with shareholder litigation also ongoing. If approved, the merger may require asset divestitures, diluting its strategic value.

The company's net debt of $94.3 billion and a debt-to-equity ratio of 5.77x further amplify risks, particularly in a high-interest-rate environment. However, management has revised 2025 capital expenditures to $11.5 billion, signaling a shift toward capital efficiency and free cash flow growth. CFO Jessica Fisher emphasized that new federal tax legislation could reduce cash tax payments by 2025, bolstering liquidity.

Innovation and Competitive Positioning

Charter's long-term strategy hinges on network evolution, product innovation, and customer-centric initiatives. Investments in 2x1 Gbps symmetrical broadband, the Zumo streaming box, and a video marketplace aim to differentiate its offerings. The company's MVNO partnership with T-Mobile also positions it to leverage 5G growth, a critical factor in an era where satellite providers like Starlink are disrupting rural markets.

Investment Considerations: Balancing Risks and Rewards

For long-term investors, the selloff presents an opportunity to assess Charter's fundamentals:
1. Financial Health: Charter maintains a strong profitability profile with a GOOD financial health score, but its leverage remains a concern.
2. Regulatory Uncertainty: The Cox merger's outcome is pivotal. A successful integration could unlock $1.5 billion in annual cost synergies, while delays or rejections would exacerbate near-term risks.
3. Market Position: Charter's focus on rural expansion and mobile growth counters declining urban broadband demand, though competition from fiber and satellite providers persists.

Conclusion: A Cautious Case for Buy

Charter's oversold RSI and strategic initiatives suggest value for patient investors willing to navigate short-term volatility. However, the merger's regulatory fate and macroeconomic headwinds demand close monitoring. If the Cox deal clears hurdles and Charter executes its rural and mobile strategies effectively, the stock could rebound on improved free cash flow and market share gains. For now, a cautious "buy" makes sense for diversified portfolios, with stop-loss thresholds near $300 to mitigate downside risk.

Investors should also watch for updates on the ACP program and competitor dynamics, as these will shape Charter's ability to sustain its recent churn improvements. The broadband sector's long-term tailwinds remain intact, but only the most adaptable players will thrive in a world of relentless technological and regulatory change."""