Salesforce lost nearly 24% of its value since September - here's why Wall Street has high hopes for its earnings on Tuesday

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Salesforce CEO Marc Benioff is expected to "beat and raise" in Q3 2019, but that may not mean much to the public markets.

• Wall Street analysts expect a "beat and raise" from Salesforce in its Q3 2019 earnings, which the company is set to report on Tuesday after markets close.
• Analysts noted that the company had strong traction in its sales department across verticals, with particular success in financial services and with its newly acquired MuleSoft products.
• Still, Salesforce stock has been hit hard by the ongoing market correction, and currently trades at lower multiples than its peers in the software space.

Salesforce stock is down nearly 24% from its high of $160 per share at the end of September, but analysts on Wall Street remain optimistic about the software giant's prospects in its Q3 2019 earnings, which it reports on November 27.

In notes published last week, analysts were unanimous that Salesforce is well positioned for another "beat and raise" quarter, even if its stock price reflects investor trepidation over more macro concerns, such as whether Salesforce trades at a reasonable revenue multiple during a market correction.

Analysts noted that as of late last week, Salesforce trades at a revenue multiple of 5.9x and 4.9x to 2019 and 2020 revenue estimates, while its peers in the Software-as-a-Service space trade at a median multiple of 6.5x and 5.4x, respectively. If looking at free cash flow estimates, Salesforce trades at a 22x multiple while its peers have a multiple of 28x.

"We expect the macro debate (risk on/off, growth>value, etc.) to overshadow fundamentals for software stocks for the remainder of the calendar," wrote Kirk Materne, an analyst with Evercore ISI.

Read more: AI and voice will completely change the job of salespeople in the future - Salesforce's in-house expert explains what you can expect

When it comes to sales, analysts noted that Salesforce is finally starting to see some of the benefits of its $6.5 billion MuleSoft acquisition and that its financial service cloud could prove to be "a meaningful driver of outperformance," according to Alex Zukin at Piper Jaffray.

"We believe there may have been one particularly large deal coming from financial services cloud at a major domestic financial institution," wrote Zukin, without naming who that deal is with.

Pat Walvrens, an analyst with JMP Securities, wrote that industry insiders have indicated to him that Salesforce has strong traction across verticals. Walvrens said he's "seen evidence of sales representatives that have far exceeded their annual quotas through the first three quarters," though noted that some buyers in the space showed hesitation when it comes to IT spending.

Here's what analysts are looking for from Salesforce in Q3 2019:

• Revenue for the quarter (GAAP): Analysts expect $3.37 billion.
• Earnings per share for the quarter (adjusted): Analysts expect $0.50.
• Revenue guidance for Q4 (GAAP): Analysts expect $3.53 billion.
• Earnings per share guidance for Q4 (adjusted): Analysts expect $0.57.