After a more than 24% climb Thursday, Coinbase (NASDAQ:COIN) shares rose again Friday, continuing to rally after a US District Judge, in a summary judgment, dismissed part of the SEC's case against Ripple Labs and ruled that the firm's crypto token, XRP, is not a security.
Following the news, Berenberg analysts remained skeptical, stating the surge was driven in large part by investors who interpreted the judge's ruling as representing a rejection of the SEC's argument in the lawsuit it filed against COIN on June 6 that many of the tokens bought and sold in secondary-market transactions on the company's exchange are unregistered securities.
"However, we believe a close reading of the ruling shows that the judge specifically did not reject that argument. As such, we believe the extent of today's rally in COIN's shares was not warranted," the analysts wrote, maintaining a Hold rating and $39 price target on the stock.
However, Needham & Company analysts said the summary judgment gives a positive read-through to Buy-rated Coinbase. The analysts, who raised their firm's price target on the stock to $120 from $70, said the judgment "sets a precedent that crypto token sales through exchanges, at least in the XRP case, did not violate securities laws."
"We believe this outcome should moderately de-risk the regulatory pressure on the stock," they added.
Raymond James analysts also stated it is positive for Coinbase's legal battle with the SEC. "The logical extension of Judge Torres' rationale is that the SEC's lawsuit against Coinbase, which in part alleged that Coinbase facilitated the trading in unregistered securities now faces an uphill battle," they wrote.
"That said, we imagine that the SEC would look to appeal Judge Torres' ruling, so today's decision may not be the final word on this issue."