Alibaba's (NYSE:BABA) stock has declined roughly 15% since the start of November due to several major concerns.

First, Chinese regulators suspended the IPO of its fintech affiliate Ant Group on Nov. 3 after Jack Ma criticized China's state-backed banking system at a government forum. The suspension will hurt both Alibaba, which owns a 33% stake in Ant, and its co-founder Ma, who owns 8.8%.

Shortly afterwards, Chinese regulators drafted new antitrust rules that would prevent the country's tech giants from using "monopolistic" tactics like price discrimination, the preferential treatment for online merchants who sign exclusive agreements, and the mandatory collection of user data. Those rules could shrink Alibaba's moat against its smaller rivals.

Alibaba's campus in Hangzhou, China.

Image source: Alibaba.

Lastly, Alibaba's second-quarter report didn't dazzle investors. Its revenue rose 30% year-over-year to 155.06 billion yuan ($22.84 billion), but merely met analysts' expectations. Its adjusted earnings per American Depository Share (ADS) rose 37% to 17.97 yuan ($2.65), which beat expectations by $0.58.

Alibaba's growth rates still look robust, and its stock looks cheap at 27 times forward earnings. But can China's top e-commerce and cloud company overcome its latest challenges and attract the bulls again?

Alibaba's core strengths

Alibaba's strengths are well known. Its Chinese retail marketplaces, which include Taobao and Tmall, hosted 757 million annual active customers at the end of September, up from 742 million in the previous quarter.

Alibaba currently controls 56% of China's e-commerce market, according to eMarketer, while its closest rival JD.com (NASDAQ:JD) holds a 17% share. Its sprawling retail business also extends into the brick-and-mortar market with grocery stores, hypermarkets, and department stores.

Alibaba controlled 40.1% of China's cloud infrastructure market in the second quarter of 2020, according to Canalys. Its closest competitors, Huawei and Tencent (OTC:TCEHY), held 15.5% and 15.1% shares, respectively.

For the bulls, those two core growth engines still make Alibaba a top Chinese tech stock to own.

Alibaba's biggest weaknesses

But if you dig deeper, you'll notice some glaring problems.

Alibaba generates most of its revenue and all of its profits from its core commerce business. Its other three segments -- Alibaba Cloud, Digital Media and Entertainment, and Innovation Initiatives -- are unprofitable.

Alibaba subsidizes the growth of those other three businesses with its core commerce unit's profits. However, the core commerce unit has been relying on lower-margin businesses -- including its brick-and-mortar stores, cross-border marketplaces, and Cainiao logistics -- to boost the segment's revenue.

But even with those lower-margin investments, Alibaba's core commerce revenue only rose 29% year-over-year during the second quarter, compared to its 34% growth in the first quarter. If we exclude the "New Retail" (mainly brick-and-mortar and direct sales) and Cainiao segments from both periods, Alibaba's core commerce revenue would have only risen 23% year-over-year in the second quarter.

Alibaba's rising dependence on lower-margin businesses caused the core commerce segment's adjusted EBITDA margin to decline year-over-year from 38% to 35%. The company's total adjusted EBITDA margin remained unchanged at 27%, but only because the cloud and digital media segments narrowed their losses.

Alibaba face significant challenges

Alibaba needs to pull off a tough balancing act. It intends to keep expanding the core commerce unit's lower-margin businesses, as we recently saw with its takeover of the hypermarket chain operator Sun Art (OTC:SURRY), but it's counting on narrower losses at its other three businesses to offset that impact.

A virtual shopping cart on a phone with a real shopping cart in the background.

Image source: Getty images.

Alibaba likely expected its stake in Ant Group, which had been on track to become the world's largest IPO, to mitigate that impact. The IPO's collapse won't impact Alibaba's near-term growth, but it also won't generate any fresh cash or boost its earnings.

Alibaba had also been relying heavily on exclusive deals with merchants. The government's newly drafted rules could end that practice, which JD and Pinduoduo have repeatedly complained about, and make it even tougher for Alibaba to increase its Chinese e-commerce revenue.

Meanwhile, new data collection and price discrimination restrictions could prevent Alibaba from leveraging its user data to expand its cloud business, or from undercutting its smaller cloud competitors to grow its market share.

That pressure could make it tougher for Alibaba to improve the cloud business' adjusted EBITDA margin -- which rose five percentage points to negative 1% in the second quarter -- and offset the ongoing erosion of its core commerce margins.

Is Alibaba still worth buying?

Alibaba's stock still looks cheap relative to its growth, but its stock probably won't rally until investors can gauge the impact of the proposed antitrust rules.

Its Chinese e-commerce revenue will also likely decelerate over the following year, due to tighter regulations, tougher competition, and the law of large numbers. Its expansion of Singles Day from a 24-hour sale last year to nearly two weeks this year highlights those growing pains.

I personally prefer JD over Alibaba, since JD has a simpler business model and is less exposed to antitrust measures, and its stock is cheaper relative to its revenue. However, I still believe Alibaba's stock will head higher after it overcomes its near-term challenges -- so it's still a worthwhile investment for patient investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.