A Clear And Sunny Forecast For Salesforce's Q4 On Expected Cloud Strength

Salesforce's stock soared after its third-quarter earnings report back in November, and investors are hoping for a repeat performance. Related Link: Microsoft May Be Gaining Traction Against Salesforce In The Cloud Space Image Credit: By Jaime de la Fuente from Mexico City, MEXICO (Salesforce.com taxi! Uploaded by MainFrame) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Zukin commented in a research report that his checks indicate salesforce will report a "solid" quarter and will have benefited from strong upselling of products and services to large enterprises. The analyst is also expecting salesforce to report "success" in its commercial business unit.

Zukin added that multiple partners suggested that they are seeing their respective practices as showing the potential to accelerate growth in fiscal 2017 on a year-over-year basis. Naturally, this is a "strong positive" sign for salesforce and suggests the company has been allocating incremental attention to its larger partners.

The analyst also suggested that salesforce's fiscal 2017 pipeline is attractive and there are several large strategic upsell deals in the pipeline. Although the year-over-year comparison for 2017 is difficult, Zukin noted he is not worried about the demand environment.

"With our checks suggesting billings outperformance in the quarter and strong deal activity for FY17, we continue to favor the name both into the print and for FY17," Zukin wrote.

Zukin also argued that Salesforce's stock has already gained 18 percent since the start of 2017 but it can still see upside. Specifically, the stock is trading at 4.9x the analyst's 2018E revenue and 25x FCF, which represents a 29 percent discount to its peers.