Once an investment darling, Alibaba (BABA -0.94%) has fallen from grace. The continued crackdown on tech companies in China, the threat of delisting, and the worsening geopolitical relationship between the U.S. and the Chinese government make the stock seem almost uninvestable.

Still, I don't think investors should write off the company altogether -- at least, not until they consider the two factors below.

Two people looking at a smartphone.

Image source: Getty Images.

Alibaba's crown jewel remains highly profitable

Alibaba has been a symbol of excellence and quality. It owns some of the best businesses in China -- e-commerce, cloud, logistics, fintech, and more -- and has been a proxy for investors wanting to benefit from the rise of the Chinese tech industry.

But lately, the tech company seems to have lost its mojo. A series of adverse events, including the failed Ant Group IPO, an intense crackdown from the Chinese government, and weak financial performance -- net profit fell 67% in fiscal 2022 -- have led investors to question the company's prospects from here.

Yet, we should not disregard the company's strengths. For one, Alibaba is still the biggest e-commerce company in China (and globally). Let's consider some numbers. For the fiscal year ended March 31, 2022, Alibaba achieved a global gross merchandise value (GMV) of 8,317 billion yuan ($1.3 trillion). By comparison, Amazon's GMV for 2021 was around $600 billion.

Alibaba served 1.3 billion customers in fiscal 2022 (1 billion in China and the rest overseas) through its China platforms (Tmall and Taobao) and overseas businesses (Lazada, Aliexpress, and others). Besides, its Chinese e-commerce segment is highly profitable, generating 182 billion yuan ($28.7 billion) in adjusted earnings before interest, tax, and amortization (EBITA) in fiscal 2022.

The company's massive scale creates an enormous barrier for competitors to overcome. As long as it continues to delight customers, it will remain one of the major players in this industry. Many competitors have tried to unseat the incumbent, including JD.com, Pinduoduo, and other lesser-known players. Still, Alibaba remains the irrefutable leader with more than 45% of China's e-commerce market in 2021.

Investors should pay attention to the signal and ignore the noise.

Still plenty of growth opportunities

Another concern investors have about Alibaba is whether the company can continue to grow. It's a valid reason to worry, especially after the e-commerce giant delivered a mere 9% growth in the quarter ended March 31. For perspective, Alibaba grew revenue by 35% and 41% in the prior two financial years.

Still, I am optimistic. To start, Alibaba can expand its e-commerce business in China and overseas, riding on tailwinds like a growing GDP per capita and increasing market penetration for online shopping. Besides, the internet retailer has expanded into the physical retail industry with brands like Hema and Sun Art, opening up new markets for growth.

What's more, Alibaba's cloud business is well-positioned to grow. Ali Cloud is already the leader in this industry with a 37% market share (the next two biggest players have a combined market share of 34%). In this business, the largest player will have a massive advantage over the rest thanks to economies of scale.

And let's not forget Alibaba's affiliate business, Ant Group, which owns the leading e-wallet in China (Alipay) and other highly lucrative businesses in lending, asset management, insurance, and more. While Ant has been subject to the Chinese government's crackdown lately, many believe that the government intends to rectify some major problems -- such as capital requirements -- and not kill the business. Sooner or later, Ant will be back to regular operations.

In short, Alibaba can depend on its flagship e-commerce business and other faster-growing businesses like Ali Cloud, Cainiao, and Ant Group to keep its growth machine spinning. With a solid balance sheet ($54 billion in cash net of borrowings) and cash flow from the e-commerce business, Alibaba has all the financial resources it needs to invest in growth.

All it needs is to execute well.