When Alibaba (NYSE:BABA) reported its quarterly earnings earlier this month, the company had to acknowledge the impact the coronavirus from China could have on its bottom line. CEO Daniel Zhang even referred to this illness as the “Black Swan” that will continue to disrupt the global market and impact industries.
Yes, the coronavirus fears continue to mount, which would lead many people to assume that now is not the time to invest in a Chinese company. But while Alibaba stock has been flat for most of 2020, there are still many factors that make it a worthwhile investment.
With over 960 million annual active customers on its various platforms, Alibaba is one of the largest companies in China. The company has both customer-to-customer, business-to-customer and business-to-business marketplaces. Here are a few reasons why Alibaba stock will continue to be a good investment in 2020 and beyond.
Alibaba’s Cloud Revenue Is Growing Rapidly
Alibaba came into the cloud computing space a bit later in the game, but its revenue has taken off in recent years. During the company’s most recent earnings report, the company reported that its cloud revenue grew by 62% to reach $1.5 billion.
The company also announced that during the most recent quarter it completed the migration to its own public cloud server. This is an important milestone because it can serve as an example to potential customers.
Alibaba still has a long way to go before it gains the market share of companies like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). But it’s still worth noting that the company is growing steadily in this area.
Increased Strength in Core Commerce Business
The biggest opportunity for Alibaba remains in its core commerce business. The company has over 824 million monthly active users which is an increase of 39 million from September 2019. This segment represents 88% of Alibaba’s total revenue.
The company continues to attract new customers by offering a variety of products at competitive prices. And what’s interesting is that 60% of the company’s new customers came from less developed areas.
The Company Has Plenty of Room for Further Growth
The coronavirus will likely have an impact on the company’s revenue in the coming year. But that doesn’t change the fact that Alibaba still has an enormous amount of growth potential.
The Chinese economy is the second largest economy in the world and it continues to grow at a rapid pace. That’s why the company is considered a strong buy on Wall Street with a potential upside of over 25%.
If economic activity declines in China due to the coronavirus, Alibaba will likely see the effects. But once some of the immediate concerns subside, the company should be back on track to achieve impressive growth.
Jamie Johnson is a personal finance freelance writer and has been writing for InvestorPlace since mid-2019. She writes for a number of other well-known financial sites including Credit Karma, Quicken Loans and Bankrate. As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
