Disciplined investors who avoid political and country risks would not look at Alibaba (NYSE:BABA). The crackdown on technology companies is hurting the e-commerce giant. The U.S./China trade war, which began during the last U.S. administration and is continuing through President Joe Biden’s administration, is not helping BABA stock.

China ordered Didi (NYSE:DIDI) to delist from the U.S. exchange and to re-list on its own Hong Kong market. The Securities and Exchange Commission (SEC) then re-asserted accounting transparency requirements. This leaves Alibaba investors scrambling to decide if the stock is a hold or one to sell.

Jack Ma Ruined BABA Stock

At Alibaba’s peak, co-founder Jack Ma looked invincible. The company planned to list its Ant Group holding as a publicly-traded company. This would have sent Alibaba shares to at least $300 or more. Yet on the eve of the listing, Ma criticized China’s financial industry establishment. His speech in Shanghai tested the Chinese Communist Party’s (CCP) limits.

The CCP not only stopped the Ant Group IPO, but in April, it forced Ma to restructure Ant. That move would weaken the fintech giant’s dominance in China. Furthermore, it would give smaller firms a chance to compete. This undermines Ant’s value to Alibaba and hurts investors.

In the second quarter, Alibaba re-affirmed its investors in its three strategic pillars of domestic consumption, cloud computing, and globalization. The bold statement failed to distract investors from a bigger problem: weaker growth ahead.

Outlook on BABA Stock

Alibaba revised its revenue guidance for 2022. It expects growth of only 20% to 23% year-over-year. This is below the 30% rate that investors expected. Investors should not have ignored the warning signs from over a year ago. The CCP is aggressively pushing its “common prosperity” campaign. It is punishing the rich and famous. For example, Google “88 celebrities banned in China.” An act as light as a male celebrity breaking up with his girlfriend will earn a ban.

According to Stock Rover, Alibaba scores well on quality and growth. The value score is weak despite the stock falling this year. Lower earnings hurt its value.

The crackdown on what Westerners will consider small things will have big repercussions on domestic demand in China. Celebrities may no longer promote goods on video sites freely without government scrutiny. Demand for goods that sell on Alibaba’s e-commerce stores will weaken. The Chinese government is leveling the playing field.

After it fined Alibaba for its monopolistic practices with a $2.8 billion fine, it will open the markets. This will benefit competitors while pressuring Alibaba’s margins.

Fair Value a Guess

Readers have no model to work on to calculate a fair value on Alibaba shares. The CCP’s crackdown is unpredictable. When it singles out Alibaba, the penalty amounts are unknown. Alibaba’s direction appears clear. It is still a target for the government.

Investors should assign a discount of 15% or more to price some of the political and country risks. This could include demanding that the stock falls by at least 15% from current levels before buying. Alibaba may continue falling after that. Or it could rebound back to the 200-day moving average (of almost $200). Most of Alibaba’s intrinsic value is too tightly tied to the Chinese government.

Notable Alibaba Developments

Tsinghua Unigroup restructured itself recently after declaring bankruptcy. Alibaba competed with state-backed Beijing Jianguang Asset Management to buy the company. This would have added to Alibaba’s chip division portfolio. Unfortunately, Alibaba lost to a consortium led by Beijing Jianguang Asset Management and Wise Road Capital.

Regulatory changes are hurting Alibaba’s customer management revenue. Competitors including ByteDance, Douyin, and Yatsen are taking Alibaba’s Tmall revenues. Pinduoduo (NASDAQ:PDD) has a moat in the rural e-commerce market. China accelerated its urbanization rates in the last several decades. Yet the rural market is still a promising, undeveloped segment. Alibaba is too far behind Pinduoduo to compete.

Other Considerations

After China asked Didi to delist from U.S. markets, the SEC may ban variable interest entity structures that Chinese companies enjoy. Alibaba shareholders would have to sell BABA stock and buy 9988.HK, listed on the Hang Seng exchange.

Readers may avoid the political risks surrounding Alibaba by considering American firms instead. Amazon (NASDAQ:AMZN) is the biggest e-retailer. Amazon Web Services is not slowing down like Alibaba’s cloud services. Last quarter, Alibaba lost a major customer, hurting its cloud business. In the retail segment, Walmart (NYSE:WMT) is building its e-commerce business. WMT stock does not trade at unfavorable valuation metrics.

In the computer chip space, investors could consider Taiwan Semiconductor (NYSE:TSM). Alibaba has specialized cloud computing chips while TSM also trades at attractive valuations.

Your Takeaway on BABA Stock

Alibaba is not the Chinese retailing giant that it once was. It faces multiple headwinds that will hurt its profit growth. The government may penalize the company by issuing new regulations. The current ones are already slowing its 2022 growth prospects.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.