It’s been another bumper year so far for Chinese e-commerce firm Alibaba Group Holding Ltd (NYSE:BABA). Alibaba stock has made its way more than 60% higher over the course of the year and investors who have stuck with the “Amazon of China” since 2016 have seen returns of more than 120%. The company’s most recent earnings report pushed BABA stock above $200 and now investors are wondering how much higher the firm will go. 

Alibaba stock has seen its fair share of peaks and troughs over the past year as investors weigh the risks of investing in a Chinese tech firm against the potential growth the company is offering. Overall the firm has remained on an upward trajectory, delivering impressive gains to those who are patient and willing to take a position when the stock pulls back. While there are still some headwinds facing Alibaba stock, the firm looks to have the potential to keep rising in the year to come.

Here’s a look at three reasons Alibaba stock has the potential to keep soaring. 

Long Growth Runway

Perhaps the largest reason investors take an interest in Alibaba stock is the firm’s key position in China’s retail market. China’s population of 1.4 billion is spending more and more, planting the country within the top five largest consumer markets in the world. What’s more is that e-commerce in China hasn’t come anywhere near reaching saturation yet. E-commerce makes up roughly 15% of China’s overall retail market and that figure is steadily growing. Last year, online sales in China rose about 30% –Alibaba’s Tmall makes up over half of those online sales. 

That’s huge for a few reasons. First, there’s a huge growth opportunity in e-commerce within China because the country’s market is still so new. Second, Alibaba has emerged as an early winner by grabbing the majority of the nation’s online shoppers. That’s similar to what we saw in the US with Amazon.com, Inc. (NASDAQ:AMZN), which quickly established itself as the first port of call for online shopping. 

While there’s still a lot of room to expand within its home country, Alibaba has already begun ramping up its international expansion efforts. The firm has been focusing mostly on Southeast Asia with Lazada, and BABA has been steadily growing its investments in that arm of its business in order to boost its presence outside of China. 

Cloud Computing Dominance

Another big reason for a rosy outlook on Alibaba stock is the company’s cloud computing arm. While BABA is best known for its e-commerce dominance, the firm’s position in the cloud computing space also looks strong. Over the past few years, BABA has been able to grow its cloud revenue by more than 100% and the firm controls nearly half of the cloud market in China. As the Number 3 cloud company in the world, BABA has been growing its revenue at an impressive pace, giving investors reason to believe that the firm will soon bump up against the likes of Amazon and Microsoft Corporation (NASDAQ:MSFT). 

Innovation

Although the first two reasons offer investors the most solid proof that Alibaba stock is worth more than $200 per share, it’s also important for a tech firm like BABA to innovate. Alibaba is currently working on “New Retail” projects that CEO Jack Ma believes will eventually expand Alibaba’s total addressable market to include the nation’s entire $5 trillion retail market. As I mentioned above, e-commerce is still only a tiny slice of China’s massive retail pie and although that slice is growing, it’s important for Alibaba to access the rest of the shopping market. 

Ma is planning to do this by integrating online and brick-and-mortar shopping rather than trying to convert physical sales into online ones. One way BABA is doing this is by creating an online system that can be used in stores around the country from major supermarkets to mom-and-pop convenience stores. Joining the system means store owners would have more insight into consumer behavior — which in turn would help with inventory management and merchandising. 

Bottom Line on Alibaba Stock

There are, of course, a number of risks associated with investing in a company like Alibaba, whose success is closely tied to China’s economy. However, the company’s growth plans look solid and you can’t argue with the growth potential of the Chinese e-commerce market. I don’t think it’s unreasonable to expect Alibaba stock to make its way above $230 over the next six months.

As of this writing Laura Hoy was long AMZN.