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Investing.com - Maxim Group downgraded Data Storage Corporation (NASDAQ:DTST) from Buy to Hold on Friday, citing uncertainty around the company’s strategic pivot following a major divestiture. The company, currently valued at $33.12 million, has shown strong price momentum with a 26.32% gain over the past six months, according to InvestingPro data.
The downgrade comes after Data Storage completed the sale of its CloudFirst subsidiary to a private equity-backed buyer for approximately $24 million in net proceeds on September 11. This subsidiary represented the majority of the company’s revenue stream, which totaled $25.46 million in the last twelve months.
Data Storage plans to use up to 85% of its cash position to repurchase shares through a tender offer, while allocating the remaining proceeds toward acquisitions and investments in artificial intelligence-enabled software, GPU technologies, or cybersecurity.
Following the divestiture, Data Storage will retain only its VoIP segment, which generates approximately $1.2 million in annual revenue. The company’s management has announced intentions to pursue new business opportunities but has provided limited details on implementation.
Maxim Group lowered its 2025 and 2026 revenue estimates for Data Storage, citing both the loss of CloudFirst’s revenue contribution and "lack of visibility into the timing of actions to pivot to new business opportunities."
In other recent news, Data Storage Corp reported its second-quarter 2025 earnings, revealing a larger-than-expected loss and a revenue shortfall. The company posted an earnings per share of -$0.10, missing the forecasted -$0.01, and reported revenues of $5.15 million, below the expected $6.2 million. In another development, Data Storage Corp completed the sale of its CloudFirst business to Performive, generating approximately $40 million in gross proceeds. After accounting for fees, taxes, and adjustments, the company estimates net proceeds of $24 million from the transaction. Additionally, Data Storage Corp issued supplemental disclosures related to its proposed divestiture of its cloud solutions business. This move came after requests from shareholders for more information on the financial analyses supporting the transaction. These recent developments highlight significant changes and challenges faced by the company.
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