Alibaba (NYSE:BABA) may have begun its path to recovery. After struggling for much of the year, a successful Singles Day has relieved many of the concerns with BABA stock.

Although sales increases offer hope for Alibaba, investors remain worried about the U.S.-China trade war. They also see an economic slowdown coming for China and worry that that will hurt sales for BABA.

However, I think most have ignored a more significant potential concern coming from inside the company.

Alibaba Stock Looks Like a Buy

Admittedly, Alibaba stock looks like a buy at these levels. Worries over the trade war with the U.S. and a more generalized economic slowdown have taken BABA stock down by about one-third from its June highs.

The current price-to-earnings (PE) ratio stands at just under 28. This comes in much lower than in most previous years. It also dwarfs the 87 PE seen in its American peer Amazon (NASDAQ:AMZN).

BABA bulls can also look to its recent “Singles Day,” which saw $30.8 billion in sales in one day. This greatly outperformed Amazon during Prime Day when it sold an estimated $4 billion in merchandise (though Amazon did not report on this directly).

It also outdid its performance from last year, increasing sales by 27% from 2017. More important, owners of BABA stock can take solace in the fact that the macroeconomic fears have not dampened sales.

Considering the Leadership Change

Given the growth and the current PE, I believe BABA will continue to rise in the short-term. However, I think investors have overlooked one concern that could easily outlast both the trade war and an economic downturn—succession.

Jack Ma announced his impending resignation as chairman in September. He named current CEO Daniel Zhang as his successor.

In fairness, all companies must eventually deal with succession. To Mr. Ma’s credit, he has handled this handoff in a deliberate manner. Since Mr. Zhang has run the company since 2015, most expect an orderly transition.

One would hope that this transition goes as well as the leadership change at Apple (NASDAQ:AAPL) when Steve Jobs handed the reins over to Tim Cook.

Something Still Could Go Wrong

Still, not all leadership changes have gone so smoothly. At Microsoft (NASDAQ:MSFT), Bill Gates transitioned Steve Ballmer into the job. However, under Mr. Ballmer’s leadership, MSFT stock languished as the PC era came to an end. It only recovered its leadership position in big tech under current CEO Satya Nadella.

However, the most worrisome precedent comes from GE (NYSE:GE). GE became the world’s largest company under CEO Jack Welch. Mr. Welch named Jeff Immelt as his successor. Despite Mr. Immelt being known to Mr. Welch, many blame the decisions of Mr. Immelt for the crisis GE faces today.

This should worry holders of BABA stock as Alibaba has become a GE-like conglomerate in many respects. Many now argue that Mr. Welch created a company that only he could run at GE.

Mr. Ma built a company similar to eBay (NASDAQ:EBAY) with Amazon-like cloud computing dominance and tech innovation comparable to Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).

We cannot yet know if only Jack Ma can run Alibaba as it exists now. However, I think conglomerate structures such as this make finding a successor more difficult. Whether Mr. Zhang becomes that person remains to be seen. Still, investors now must regard a long-term holding in BABA as a bet that Mr. Zhang will run Alibaba successfully.

The Bottom Line on BABA Stock

Despite the signs of recovery in BABA stock, investors must consider succession when investing in Alibaba. Strong Singles Day sales brought renewed interest in Alibaba stock.

While that may allay trade war or economic worries, investors still need to remain concerned about the leadership transition. As we learned from GE’s experience, Alibaba’s conglomerate structure could increase the likelihood of a failed succession plan.

Mr. Ma will remain chairman for the next ten months. For this reason, I can see buying BABA stock as a short-term trade. However, Mr. Ma leaves the board and Alibaba entirely after the 2020 shareholders meeting.

At that point, investors will start to see more clues as to whether Mr. Zhang better resembles Tim Cook or Jeff Immelt. Whether BABA stock remains a profitable long-term investment will likely hinge on that question.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.