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 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!