With more than 200,000 investors said to have applied for the retail portion of Alibaba’s (NYSE:BABA) upcoming Hong Kong stock sale, and just ahead of that season when investors revisit their long-term holdings, I’d like to make the case for the Chinese e-commerce conglomerate. BABA stock simply is an important addition for most long-term portfolios.

On Nov. 1, Alibaba reported robust financial results for the quarter ended Sept. 30, 2019. Year-to-date, BABA stock is up about 20%. And in May 2019, Alibaba was ranked China’s most-valuable brand. Many investors are now wondering whether BABA shares can continue their strong performance in 2020, too. Investors should regard any dip in the Alibaba stock price as a good opportunity to go long the shares. Here is why:

BABA Stock’s Earnings Beat Expectations

Throughout 2019, due to the ongoing China trade war, investing in that country’s companies has come with risk. Yet many analysts have highlighted that Alibaba’s bottom line would not be too adversely affected by the current trade rhetoric as its business model is tied to China directly, decreasing the long-term risks of bi-party trade wars.

In China consumer disposable incomes are going up, fueling growth in many sectors, including e-commerce. In fact, the e-commerce market in China is forecast to near double within the next four years to reach $1.8 trillion.

Recent research led by Victor Couture of the National Bureau of Economic Research discusses how the “number of people buying and selling products online in China has grown from practically zero in the year 2000 to more than 400 million by 2015, surpassing the US as the largest e-commerce market … [and that] the Chinese government recently announced the expansion of e-commerce to the countryside as a national policy priority.”

When Alibaba released its quarterly report, the results exceeded analyst estimates in both revenue and earnings. Consolidated revenue for the group was up by 40% YoY and adjusted EBITDA increased by 39%. Revenue came at $16.65 billion or about 1.1% higher than the analyst consensus estimate of $16.47 billion. The quarterly adjusted EPS of $1.83 was also higher than the estimate of $1.51 per share.

Strength in numbers was in good part due to Alibaba’s core commerce business which brings in about 85% of total revenue.

Revenue from the core commerce business segment made up for 85% of total sales. In Sept. 2019, its China retail marketplaces, i.e., mainly Taobao and Tmall, had 785 million mobile monthly active users (MAUs), representing a quarterly net increase of 30 million.

The Chinese Singles Day holiday on Nov. 11 racked up a record $38.3 billion worth of merchandise sold on Alibaba’s platforms. This number also bodes well for the overall strength health of the country’s e-commerce industry.

Further Tailwinds For Alibaba Stock

With strong profits generated from its core commerce business, Alibaba has been rapidly expanding into many other lucrative industries, including cloud computing infrastructure, digital payments, online entertainment, and food delivery.

Cloud Computing: BABA is now the market leader in Asia. Its service offering includes remote cloud computing power, data storage, big data processing, as well as a content delivery network. The cloud computing segment revenue, which contributes about 8% of total revenue, rose 64% YoY.

Alibaba’s concentrated push deeper into cloud computing is increasingly being compared to the success of Amazon’s (NASDAQ:AMZN) cloud business. In comparison, Amazon reported a a recent quarterly increase of 35% in its cloud segment.

The group has more than 40% of the public cloud market in China. The market share of Tencent Holdings (OTCMKTS:TCEHY), its biggest competitor, is about 10%.

As China’s cloud markets grows, so will Alibaba’s cloud business. With expected levels of growth in the cloud space, Alibaba’s total revenue is expected to grow by double-digit percentage rates. Such a growth rate would indeed be impressive for a company with a market cap of about $482 billion.

International Growth: Forward-looking investors should also pay attention to BABA’s international growth numbers. Currently, more than 90% of the e-commerce giant sales are made in China.

But BABA also has investments in start-ups in South Asia and Southeast Asia. Higher incomes and rising internet penetration rates are likely to strengthen both regions’ online markets and contribute to sustainable growth for BABA stock.

Among the start-ups in those regions in which BABA has stakes are Paytm, an Indian digital payments provider, and Lazada, a Singapore-based e-commerce company that is growing in overseas markets.

The group’s international businesses, expanded with 35% YoY revenue growth, is led by its overseas marketplace AliExpress as well as Lazada.

Its mobile payment network, Alipay, is also seeking to expand in globally. International growth will not only help increase the company’s bottom line, but it will also enable BABA to diversify away from China, lowering the macro risk of BABA stock.

BABA Stock’s Upcoming Hong Kong Listing

Now, about that Hong Kong listing. Alibaba is expected to raise about $13 billion as shares start trading on Nov. 26 at 176 Hong Kong dollars, or $22.48.

Our readers may already be familiar with the fact that in 2007, the company’s B2B platform alibaba.com listed on the Hong Kong Stock Exchange. Yet BABA later delisted from that bourse in June 2012.

Throughout 2019, there has been speculation as to why the company wants to move closer to China in a second listing and raise cash. Both the bulls and the bears have been debating Alibaba’s motives.

Can BABA’s second listing encourage others to follow Alibaba to Hong Kong?

Does Alibaba need the cash for reasons investors do not know yet? Should investors therefore be worried?

A recent Bloomberg opinion posited that Alibaba will be sitting on $43 billion in cash, which it noted “sounded like a great problem to have.” “Sitting on that cash is really the easiest, most unimaginative thing to do. But no one says they can’t,” the column noted.

The exact result of this listing is still hard to pin down. Could the U.S.-China trade tensions lure more Hong Kong-based investors into buying Alibaba stock?

We do not know how its U.S. shareholders may react, either. One thing we can possibly count on is increased volatility in BABA stock price at the time of listing.

Where Alibaba Stock Price Is Now

Over the past 12 months, BABA stock is up 19.7%. Its 52-week range has been $129.77 (Dec. 24, 2018) – $195.72 (May 3, 2019).

Following the release of the recent Q2 report, Alibaba share price has made a new leg up and on Nov. 8, reached a recent high of $188.28.

Because of the recent impressive run-up in the price of BABA stock, short-term technical indicators have become somewhat over-extended. Investors who pay attention to short-term oscillators should note that its technical message has also become “overbought.”

In the next few weeks, Alibaba stock could trade sideways and even have a pullback toward the $175 level or even the $170 level, where the stock is likely to find major support.

BABA stock’s beta is 2.2, which means its more than twice as volatile than the broader market. Therefore, if other big tech names or China-based companies decline, then Alibaba shares may also take a breather.

I would suggest that long-term investors wait until BABA stock builds a base between $170 and $175. However, it you are able to handle some short-term volatility, then you may consider any dip in Alibaba stock price as an opportune time to go long the shares.

Yet, the daily volatility of Alibaba stock is high, giving it a wide trading range, so short-term traders should proceed with caution.

Going forward, if current trade tensions or the Hong Kong political protests are swiftly resolved or the U.S. and China come to some sort of resolution on the trade issues, then the Alibaba share price could rebound quickly.

Bottom Line on BABA Stock

With a population of 1.4 billion people, China is the largest country in the world. A rising middle class leads to higher consumerism, and that bodes well for many industries in China.

BABA stock has multiple catalysts to drive growth in the coming years including robust financial resource. Its core marketplace operations provides the group with strong cash flow. In other words, e-commerce, cloud computing, and other investments throughout China and globally make it a disruptor and a sound long-term investment.

Alibaba stock and other Chinese names may undergo volatility and some profit-taking in the coming weeks. However, investors with a two- to three-year horizon may view any decline in the BABA stock price as a good opportunity to buy into the shares.