DTST skyrockets: Is Data Storage a rallying meme stock?

Stocks of Data Storage Corporation (DTST:US, NASDAQ:DTST), an IT service provider, rocketed by over 61 per cent on Wednesday, July 7 (10:15AM EST). It noted a trading volume of about 20 million during the premarket hours.

This surge appears to have come on the back of a meme stock rally.

Earlier in June, the company had announced its merger with Flagship Solutions, but the development did not seem to have an impact on the IT firm’s share price around that time.

Data Storage Corp has been exploring other acquisition and partnership opportunities in cloud-based operations as well. The company also raised substantial capital in an offering of 1.6 million units at US$ 6.75 apiece in May 2021.

Let us look at this meme stock’s price performance.

Data Storage Corporation (DTST:US, NASDAQ:DTST)

The cloud-based service provider operates in the cybersecurity segment and offers computing solutions. The firm generates its net income from cloud-based software services and data protection.

DTST stock gained almost 30 per cent in the last two months, rising to a value of US$ 9.84 apiece. The data stock has doubled in value this year with a surge of 104 per cent.

Its month-to-date price rally is up by 97 per cent, seemingly led by the Reddit-based retail investors’ hype buying.

Its 10-day average volume has soared by three times against its 50-day average volume of 196,214 shares.

Data Storage’s stock holds earnings per share of US$ 0.03 and a return on equity of 4.61 per cent. 

The IT stock has managed to surpass the NASDAQ Composite Index in the past one year, with an increase of 58 per cent against that of 12 per cent, respectively.

Data Storage’s one-year stock performance against moving average multiple. (Chart Source: Refinitiv)

The stock saw its first meme-based rally in February 2021. Consequently, its share price zoomed to 38.80 apiece. However, the stock could not sustain this rise more than a month and it tumbled over 70 per cent.

DTST stock has witnessed a similar fluctuation in the present month, which has helped it outperform its moving average multiple. As per historical data, this rise could also be as brief.

In fiscal 2020, the company reported a top line of US$ 9.3 million, noting an increase of 10 per cent on a year-over-year (YoY) basis. Its operating expenses were up 13 per cent YoY in 2020. The company recorded a rise in profit of US$ 173, 359 in 2020, compared with US$ 29,323 in 2019. 

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.