It has been difficult for Alibaba's (BABA -0.92%) investors over the last two years. The stock has lost more than 75% of its all-time-high market capitalization amid a series of challenges, including weaker financial performance and the threat of delisting. But for those still holding the stock, there are good reasons to hang on. Let's see why.

Person shopping for clothes in a mall.

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Alibaba's core business is still printing cash

Alibaba recently made headlines as its business delivered a multi-year-low growth rate of 19% in the fiscal year that ended March 31. Worse, revenue came in flat in the first quarter of its fiscal 2023, and operating income fell 19% year over year.

Such numbers don't look pretty for the leading Chinese tech company, which has been accustomed to growing at high double digits since its IPO in 2014. Once a darling of growth investors, Alibaba has felt more like a plague they want to avoid at all costs.

But I think the weak growth rate is temporary rather than permanent. More importantly, there is still plenty to like about Alibaba's existing core e-commerce business, even if it does not return to its historical growth trajectory.

For starters, Alibaba is the biggest e-commerce company in the world. It enabled sales transactions of $1.3 trillion in gross merchandise value (GMV) in its fiscal 2022. This figure was more than two times Amazon's GMV for 2021. The Chinese tech company served 1.3 billion  customers that year across China and overseas, generating $29 billion in adjusted earnings before interest, tax, and amortization (EBITA). We can consider EBITA as a proxy for cash flow from operations.

With its sheer size, Alibaba can offer the most extensive catalog of products at attractive prices to delight customers. It also has operating leverage (again, thanks to its size), making it difficult for smaller competitors to reach its level of profitability. And while it's not immune to competition from the likes of Pinduoduo, a top rival, it will take a lot from these competitors to unseat the giant. Alibaba still has a 47% market share in China.

In short, Alibaba's e-commerce business will continue to print cash for a while, giving it plenty of leverage to fund other growth opportunities.

The elephant can still dance

It's not a secret that Alibaba is already a gigantic company with $135 billion in annual revenue. It will be difficult for the giant to sustain its ultra-high growth rates of the past. Still, for a few reasons, Alibaba's latest performance is not indicative of what the company may achieve in the coming years.

As a start, the external environment in China and overseas remains favorable for tech companies to grow, thanks to tailwinds such as digitization and GDP growth. As a significant player with businesses across multiple segments, including commerce, fintech, cloud computing, and logistics, Alibaba is well-positioned to ride these trends for years to come.

For example, Alibaba's cloud computing business is a front-runner with a 37% market share in China, outrunning the second and third players' combined market share. With economies of scale, Alicloud can offer the best service at the lowest cost. Moreover, the cloud industry in China is highly protected from foreign companies like Amazon or Microsoft amid China's strict data security policy, making it impossible for these giants to challenge Alicloud's leadership there.

Besides cloud computing, Alibaba can also count on other segments, such as logistics and fintech, to allocate capital for future growth. And that leads to other critical aspects of the company: its strong balance sheet. The e-commerce giant has $51 billion in cash (net of debt). On top of that, it continues to generate substantial cash flow ($23 billion in annual operating cash flow in FY 2022), adding to its cash pile.

In other words, Alibaba has plenty of cash reinvest its profits from the mature e-commerce business into younger ventures that can help return the company to its growth trajectory.

A quick word on potential delisting

Another concern investors may have with Alibaba's stock is the risk of delisting. I think such a concern is probably overblown. Alibaba's stock is dual-listed, both in the U.S. and Hong Kong. In the worst-case scenario, investors will still be able to exchange their U.S.-listed Alibaba stock with Hong Kong-listed stock. It may cause some inconveniences, but not a permanent loss of capital.

Besides, the U.S. regulators have reached a new agreement with their Chinese counterparts on audit inspection for U.S.-listed Chinese companies. Under this agreement, the U.S. regulators would audit the listed Chinese companies in Hong Kong. The first inspection batch began in September. If the audit goes smoothly, it may reduce the delisting risks that U.S.-listed Chinese companies face.

It should also make it more compelling for investors to hold on to their Alibaba shares.