Alibaba's (BABA 0.80%) stock price has fallen by around two-thirds from its peak of $317. For contrarian investors (myself included), it seems a good time to consider this leading tech company.

But before we start loading up on the stock, investors should have a holistic view of Alibaba to understand the risks and the potential rewards.

Three people shop online.

Image source: Getty Images.

The good: It owns some of the best businesses in China

Alibaba has been one of the best-performing companies in China over the last two decades. During this time, it built the largest e-commerce business in the country and developed some leading ventures across other sectors.

The company's crown jewel e-commerce business (led by Taobao and Tmall) served more than 900 million customers in fiscal year 2022 (which ended March 31, 2022 ). This segment generated 592.7 billion yuan ($93.5 billion) in revenue and netted 182.1 billion yuan ($28.7 billion) in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). While the e-commerce industry is highly competitive, Alibaba's early-mover advantage and enormous scale create a massive barrier for existing and new players to overcome.

Alibaba's early success in its e-commerce business provides the ingredients for horizontal expansion into related industries like fintech, logistics, cloud computing, and more. Take Ant Group (Alibaba's fintech associate), for example. It has more than 50% market share in China'sonline payment industry and leads in other areas like online lending. Cainiao -- Alibaba's logistics platform set up to serve Taobao and Tmall customers in the early days -- is now a leading logistics player in China and overseas. On top of that, Alibaba Cloud is a dominant player (37% market share) in China's cloud-computing industry.

But those are not all. Alibaba owns a local consumer service business, an online video platform, overseas e-commerce ventures, and many early-stage investments. Together with its flagship e-commerce business, these younger ventures can keep Alibaba busy (growing) for years to come.

The bad: The latest numbers underwhelmed

While Alibaba undeniably owns many solid businesses, its latest numbers were disappointing.

Revenue grew 9% year over year in the fiscal 2022 fourth quarter, dragging down Alibaba's full-year revenue growth rate to 19%. The tech company has historically grown revenue more than 30% annually since its IPO. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter also declined 22% year over year.

A couple of factors drove the weak performance. Alibaba's flagship e-commerce business faced significant competition from younger players like Douying and Kuaishou. At the same time, its younger enterprises delivered low quarterly growth. Alibaba Cloud, for example, only grew revenue 12%. It also did not help that its international businesses, such as Lazada, faced enormous challenges trying to catch up with the leader Shopee (owned by Sea Limited) in Southeast Asia.

Despite its recent woes, investors are hopeful that Alibaba can regain its past glory. After all, it still has cash-cow businesses -- Tmall and Taobao -- which can continue to fund investments into other segments (such as Cainiao and Alibaba Cloud). Still, those investors will need to wait patiently for that turnaround since analysts expect fiscal 2023 revenue growth to be even lower than fiscal 2022 at just 7.3%.

The ugly: The stock could remain cheap for a while

Alibaba is trading at an attractive valuation. At about $102 per share, the company trades at 2.1 times sales. In the last five years, its price-to-sales ratio averaged 8.4 and was over 18 in 2017. Moreover, the current share price is just 50% higher than the IPO price of $68, while the underlying business has grown more than ten-fold since its U.S. market debut.

Bargain hunters will likely find Alibaba's stock cheap, but here's the problem: There is no guarantee Alibaba's valuation will return to its historical levels. On the contrary, we can argue the stock will remain cheap for several reasons.

To start, the adverse effects of the Chinese government crackdown on tech companies will linger for some time. And like all U.S.-listed Chinese companies, Alibaba faces the threat of delisting in the U.S. unless it meets the audit requirements set by the SEC. And amid these challenges, the tech conglomerate's slowing growth creates another level of uncertainty for investors.

In short, Alibaba's valuation could remain cheap until investors get more comfortable holding China stocks again or until growth starts to pick up. With so much pessimism around the company, this could take months, if not years, to materialize.

Investors will need plenty of patience.