Salesforce reports as expectations, and stock, soar

Salesforce is enjoying a very strong run, but the question for investors is what needs to happen to keep that momentum going?

On Wednesday, after the close, Salesforce is expected to report third-quarter earnings-per-share of $0.13 on revenue of $1.4 billion, which would represent growth of 27 percent on the top line.

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Salesforce is considered a pioneer in the cloud software business. Research firm IDC pegs the public cloud market at $57 billion this year and says the market will balloon to $127 billion market by 2018.

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Salesforce is profiting from that rapid growth, and it has enjoyed a strong recent run up. Since its annual Dreamforce event on Oct. 13, the company's stock is up 17 percent, easily besting the performance of the S&P 500 and the Nasdaq.

FBR's Samad Samana attributes the recent gain, in part, to the company's launch of new products such as 'wave', which is Salesforce's first move into the $38 billion analytics market.

In order for the stock to move higher from here, Samana said Salesforce needs to offer strong guidance for fiscal year 2016. Right now, analysts on Wall Street estimate revenue growth of 24 percent.

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The San Francisco-based company will also need to commit to margin expansion and continue diversifying its business into new cloud offerings, Samana said. One potential acquisition target: Demandware, which runs ecommerce platforms for retailers.

Analysts also emphasize risks for Salesforce, however. They note valuation concerns as well as elevated expectations headed into the earnings release, which could temper share response even to a strong report.

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Still, at least right now, many investors think cloud computing adoption will continue to jump by leaps and bounds, and that Salesforce is one powerful proxy for that growth.