Is It Time to Short Cloud Computing Stocks?: NetSuite Inc. (N) and More

Hackers have taken a bigger interest in the cloud lately, and that’s bad news for investors in the publicly traded companies that operate there.

On Thursday, Zendesk, which provides an online platform for customer support, reported in a blog post that an intruder breached its servers and accessed data from three of its customers. Wired has since identified the victims as three social-network sites: Twitter, Tumblr, and Pinterest.

NetSuite Inc (NYSE:N)“We’re incredibly disappointed that this happened and are committed to doing everything we can to make certain it never happens again,” Zendesk CEO Mikkel Svane said in a blog post announcing the breach. “We’ve already taken steps to improve our procedures and will continue to build even more robust security systems.”

So far, Zendesk’s troubles haven’t done much to dampen enthusiasm for related public equity issues such as NetSuite Inc. (NYSE:N)salesforce.com, inc. (NYSE:CRM), and Workday Inc (NYSE:WDAY). Yet any one of them could be next.

Six years ago, hackers accessed one of Salesforce’s email databases and used the information to launch attacks against two of the company’s largest customers at that time: Automatic Data Processing (NASDAQ:ADP) and SunTrust Banks, Inc. (NYSE:STI). Both NetSuite and Workday list potential damage from a security breach among the major risk factors facing their businesses in SEC filings.

Should you stay out of these stocks, then? What about shorting them? All three merit just one star out of a possible five from the investors rating them in our Motley Fool CAPS database. Valuation, rather than security, tends to top their list of concerns.

All-Star stock picker buffalonate wrote: “This stock is drastically overvalued. Guaranteed to crash at some point in the near future. It is valued at $20 billion and struggles to make a profit most quarters. There is also a lot of insider selling.”

I’m less concerned about valuation because these and other cloud suppliers are disrupting a market worth hundreds of billions of dollars annually. Investing now to capture future revenue streams makes sense. Security is another matter. Software must first be trustworthy before it can be viable, which makes hackers’ increased appetite for cloud platforms a substantial risk.

The article Is It Time to Short Cloud Computing Stocks? originally appeared on Fool.com and is written by Tim Beyers.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of salesforce.com at the time of publication. Check out Tim’s Web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Automatic Data Processing, Netsuite, and salesforce.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!