In an environment where regulators have slapped major banks with multi-million dollar fines for breaking rules, the SEC's on-going investigation into Alibaba (: )'s accounting practices is clouding investor sentiment, one portfolio manager told CNBC.
Christian Magoon, CEO at Amplify Investments, told CNBC's " The Rundown " that investors were hesitant to initiate a new position on Alibaba's stock because they were not sure if the U.S. Securities and Exchange Commission (SEC) would hand the Chinese e-commerce giant any fines or penalties.
Alibaba said in May that the SEC was looking into its accounting practices related to transactions between its Cainiao logistics arm and other affiliates, as well as the way it reported figures from its annual "Singles' Day" shopping event.
On Wednesday, Alibaba's stock closed down 2.61 percent on the NYSE, after the company posted strong earnings and revenue that topped analysts' expectations.
"Once the stock gets past this, be it a good or bad outcome, I think we will see a relief for Alibaba," Magoon said said of the investigation.
On Tuesday, The New York Post reported that a whistle-blower at the Chinese e-commerce giant was helping the SEC with the investigation — a claim that Alibaba rejected.
In the three months to September 30, Alibaba's revenue jumped 55 percent on-year to 34.29 billion yuan ($5.14 billion). While the Chinese tech giant's core online retail business posted a near 50 percent growth in operating income, its cloud computing, digital media and entertainment and innovation businesses continued to make losses.
Magoon said he was not excessively concerned about the lack of profitability in those businesses since they were still growing. For example, the number of paying customers using Alibaba's cloud services grew 108 percent on-year to 651,000 users.
"They are trying to follow the Jeff Bezos model," he said, referring to how rival Amazon (NASDAQ: AMZN) made a series of investments in various non-core businesses, grew them and eventually turned them into money-makers for the company, such as its cloud business Amazon Web Services.
"I'm willing to give them the benefit of the doubt that they will be able to turn these businesses into profit centers in the years to come," Magoon said.
Magoon and other analysts expect a much stronger performance from Alibaba in the December-quarter, as the company gears up for the 24-hour "Singles' Day" shopping event on November 11, which is said to be much bigger than both the Black Friday and Cyber Monday shopping events in the United States.