Alibaba (BABA  ) reported earnings that were above expectations. The stock has been a strong performer all year along with other mega-cap tech stocks with exposure to cloud computing and e-commerce. It also has a looming catalyst in the upcoming Ant Group IPO. However, a risk is the increasing tensions between the U.S. and China which could lead to Chinese companies delisting from U.S. exchanges.

Inside the Numbers

Alibaba reported $2.14 per share in earnings for the quarter which was 30.8% higher than last year and slightly above analysts' expectations of $2.05. Revenue was $19.3 billion for the quarter which was 33.8% higher and slightly above analysts' estimates. Cloud computing revenue grew 59%.

In the cloud computing race, Alibaba is in fourth place behind Amazon (AMZN  ), Microsoft (MSFT  ), and Google (GOOG  ), however, it has the fastest growth rate and is the leader in Asia which is furthest behind in cloud-penetration.

Most of the metrics reported strong growth including its retail marketplace which added 28 million users to reach 842 million users. Alibaba benefitted from the increase in e-commerce sales due to the coronavirus. It's recent results show that it's been able to hold onto to these new users despite many parts of China returning to normal. Other Chinese e-commerce companies like JD.com (JD  ) reported strong earnings. This a good indicator for U.S.-based companies like Target whose e-commerce operations have experienced strong growth.

Stock Price Impact

Despite the impressive results, Alibaba's shares were 1% lower. Overall, Alibaba's stock has been consolidating between 270 and 240 over the past month. Since the March bottom, it's 50% higher.

Despite these gains, it's also clear that the stock has been hurt by increasing U.S.-China tensions and chatter about Chinese companies delisting from U.S. exchanges. Both sides have discussed this, and it's a clear risk-factor for Alibaba.

Without this risk, shares would be trading at much higher levels, especially when you compare Alibaba to the mega-cap, technology stocks like Amazon. Alibaba is growing faster and has a cheaper valuation. For example, Alibaba has a forward price to earnings ratio of 23, 34% sales growth, and gross margins of 44%. In contrast, Amazon has a forward price to earnings ratio of 75, 40% sales growth, and 40% gross margins.

Alibaba also owns 33% of Ant Financial which is the largest fintech company in the world. Looking at Square (SQ  ) and Paypal (PYPL  ), valuations of fintech companies have been increasing, and it's likely to carry over to Ant. In a vacuum, Alibaba should have higher multiples given these metrics and factors.

Amazon's valuation is nearly $1.7 trillion, while Alibaba is valued at $700 billion. Yet, Alibaba had profits of $21 billion over the last 12 months, while Amazon had profits of $13 billion. It's likely that this discrepancy is due to the risk of delisting or an increase in tensions between the U.S. and China which could disrupt Alibaba's business or its stock. Therefore, it's also possible that a Biden victory might lead to these tensions reducing which could lead to Alibaba's multiples rising.