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 Click to see monthly returns in table format!

Lists

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

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!