Alongside the rest of the market, Chinese e-commerce and technology giant Alibaba Group Holding Ltd (NYSE:BABA) has fallen on tough times recently.

After a red-hot 2017, Alibaba stock got started on the right foot in early 2018. But a strong January was followed by a weak February and a weak March. All together, Alibaba stock is up just 1% on the year and more than 15% off its 2018 highs.

Why the sudden weakness in Alibaba stock? Well, there is the awful technology sector backdrop. The tech sector is currently riddled with concerns over data breaches at Facebook, Inc. (NASDAQ:FB), potential regulation at Amazon.com, Inc. (NASDAQ:AMZN), production and credit issues at Tesla Inc (NASDAQ:TSLA), and self-driving hiccups at Nvidia Corporation (NASDAQ:NVDA).

That backdrop doesn’t help things for BABA.

But Alibaba stock has been particularly weak because investors are concerned about the company’s margins. Across the board, it looks like every mega-tech company in China is spending big in order to grow big. Alibaba is part of this group. The company is investing in areas like offline retail, artificial intelligence, automation and logistics. Those investments cost money, and therefore, are dilutive to margins in the near-term.

Moreover, the Alibaba of tomorrow — which will have a bunch of moving parts, not just e-commerce and cloud businesses — will likely have a lower overall margin profile than the Alibaba of today. That also freaks investors out.

But in the big picture, these lower margins shouldn’t matter all that much. As Alibaba management said on its most recent conference call, would you rather have 60% of an apple or 40% of a watermelon?

Make no mistake. Alibaba is turning its business from an apple to a watermelon. This transition makes Alibaba stock look compelling at current levels.

Here’s a deeper look:

Alibaba Is Growing by a Bunch

Traditionally, Alibaba is thought of as China’s leading e-commerce and cloud player. This remains true today, and will remain true into the foreseeable future. But over the next several years, Alibaba will morph into so much more than that.

Alibaba is currently making big and aggressive moves on all consumer and technology fronts in the Chinese and Southeast Asian markets.

Of course, there is Alibaba’s e-retail behemoth, which isn’t slowing at all despite tough laps and increasing scale. Core commerce revenues were up 57% last quarter, versus 45% in the year-ago quarter. Because e-commerce is e-commerce, regardless of whether it’s in the U.S. or China, Alibaba’s e-retail business should continue to grow at Amazon-like growth rates over the next several years. It’s also worth noting that big multinational companies like H&M are starting to see the value of Alibaba and joining its e-retail platform.

Then, of course, there is Alibaba’s leading cloud business. That business is growing at a triple-digit rate. It is growing so fast that Alibaba Cloud, despite its infancy, is already one of the five largest cloud businesses in the world. This business will continue to grow as the need to store, access, and protect data grows increasingly important over the next several years.

Alibaba Stock’s Potential Beyond the Cloud

But the exciting part of Alibaba’s future growth prospects lie beyond e-retail and the cloud.

For example, Alibaba is turning into a massive offline retail player. The company operates a ton of Hema convenience stores. They also acquired Walmart-style department store Intime for $2.6 billion in early 2017. Only a few months later, BABA poured $2.9 billion into China’s biggest grocer. Now, the company is building out car vending machines with Ford Motor Company (NYSE:F).

This is potentially huge. Despite all the talk about digital sales growth, the majority of shopping is still done in the offline space. After all, e-commerce represents less than 10% of total retail sales in the U.S.

Alibaba is also making huge moves in the sharing economy. The company just fully bought out one of China’s premiere food-delivery companies for $9.5 billion — this would be like Amazon acquiring Postmates. Before that acquisition, Alibaba led a big investment round in a global bike-sharing company.

Bottom Line on Alibaba Stock

Putting all of it together, it is easy to see how Alibaba is transforming from an apple to a watermelon.

The company will maintain dominance in its core e-retail and cloud markets. But Alibaba is also building out the infrastructure necessary to be a leading player in huge markets like offline retail, ride-sharing and logistics.

Because of this, an overall lower margin profile doesn’t really matter. As the saying goes, I’d rather have 40% of a watermelon than 60% of an apple.

As of this writing, Luke Lango was long BABA and FB.