Salesforce.com, Inc. provides enterprise cloud computing solutions to various businesses and industries worldwide. It is the largest provider of customer relationship management (CRM) software, and its CRM platform has become the world’s leading enterprise cloud ecosystem. Industries and companies of all sizes can connect to their customers using the latest innovations in mobile, social, and cloud technology to sell, service, market, and succeed like never before. Seen as a pioneer in the cloud software business, much of its success is a result of its software-as-a-service (or SaaS) modules and related offerings.

Salesforce.com stock had a strong performance for much of 2014 because of its large revenue growth, new platforms, and acquisition model. The company has had consistent revenue growth since being founded in 1999, with revenue growth this year up close to 30% since this time last year. Being a leading company in the cloud and SaaS space, Salesforce.com is able to leverage its strengths to solidify its position in the small and medium-sized business (or SMB) space. One way it has done so is its new CRM platform Salesforce1. The platform was designed for developers, independent software vendors (or ISVs), end users, and customers. Organizations are quickly realizing the importance of the cloud, and Salesforce1 has been developed to benefit from this trend. It’s a mobile application and platform allowing the company to connect with customers in an exhaustive way. It is expected that around 60% of Internet users will choose mobile customer service applications by 2015, making Salesforce1 a potential cash cow.

Acquisitions are also expected to enhance capabilities for Salesforce.com, especially ExactTarget and RelateIQ. Purchased for $2.5 billion, ExactTarget brings added enhanced email campaign management and marketing automation to its marketing cloud. This acquisition also included the marketing automation application Pardot. It allows marketing and sales departments to create, deploy, and manage online marketing campaigns. Pardot increased Salesforce’s revenue and enhanced its efficiency. RelateIQ was also acquired for $390 million. This acquisition should be a key value addition in the CRM space, as it eliminates the manual data entry. Besides these acquisitions, the company also announced a partnership with Microsoft. The key point to this deal is the interoperability between Salesforce.com and Microsoft Office 365. It increases Salesforce.com’s offering coverage across different platforms, allowing customers to access business-class email and calendar services, online conferencing, and secure file sharing through Office 365.

All of these factors helped the company’s stock perform well for most of 2014. The I Know First Algorithm had a bullish forecast for Salesforce.com on November 29^th, 2013 in the one-year time horizon. The company had a signal strength of 13.34 and a predictability indicator of 0.21. In accordance with the algorithm, the value of the stock increased by 13.58% over that time.

Since that time, there have been some concerns for the company, however. The main concern is the results of their third-quarter earnings report. While revenue growth and earnings per share marginally beat analysts’ expectations, guidance for the fourth-quarter of this year and for next year were below consensus estimates. Concern also grew over a slowdown in the company’s subscription growth. This problem is made even worse by the fact that its subscriber acquisition spending is outpacing that of its peers. Salesforce.com spends about $1.94 for each dollar of new business when the industry average is about $0.70.

While the company reported earnings per share of 14 cents, this did not use generally accepted accounting principles (GAAP). While the company appears to be profitable under the non-GAAP system, using GAAP reporting considers stock-based compensation as an expense. Salesforce.com pays about 12% of its revenues in stock compensation, compared to 1.5% of revenues for Amazon, one of their main competitors. This type of compensation dilutes the share count, and while it’s a non-cash expense, it definitely isn’t free. Using GAAP principles, the company’s earnings per share was actually a loss of 6 cents. The CEO of the company, Marc Benioff, recently sold 37,500 shares of the stock on the open market for an average of $55.50, for a total value of $2,081,250.

Even though the company experienced revenue growth of roughly 30% on a year-over-year basis, its operating expenses have grown at a much higher rate. This has led to the company having negative margins since 2011. Due to these negative factors, the company’s stock has been bearish for the last couple of months. The I Know First Algorithm correctly predicted that this would happen, giving Salesforce.com a signal strength of -15.73 and a predictability indicator of 0.45. Once again, the algorithm was correct, as the value of the stock decreased 10.03% in accordance with the algorithm.

I Know First is a financial services firm that utilizes an advanced self-learning algorithm to analyze, model and predict the stock market. The algorithm produces a forecast with a signal and a predictability indicator.  The signal is the number in the middle of the box. The predictability is the number at the bottom of the box.  At the top, a specific asset is identified. This format is consistent across all predictions.

The signal represents the predicted movement direction or trend, and is not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price. The signal can have a positive (predicted increase) or negative (predicted decline) sign. The heat map is arranged according to the signal strength with strongest up signals at the top, while down signals are at the bottom. The table colors are indicative of the signal. Green corresponds to the positive signal and red indicates a negative signal. A deeper color means a stronger signal and a lighter color equals a weaker signal.

The predictability indicator measures the importance of the signal. The predictability is the historical correlation between the prediction and the actual market movement for that particular asset, which is recalculated daily. Theoretically the predictability ranges from minus one to plus one. The higher this number is the more predictable the particular asset is. If you compare predictability for different time ranges, you’ll find that the longer time ranges have higher predictability. This means that longer-range signals are more important and tend to be more accurate.