China Regulators Suspend Alibaba Cloud Partnership; CLSA Remains Bullish On Alibaba

Chinese regulators suspended an information-sharing partnership with Alibaba Group Holding Ltd BABA Alibaba Cloud Computing, Reuters reports.

  • Alibaba Cloud allegedly failed to promptly report vulnerabilities in the popular, open-source logging framework Apache Log4j2 to China's telecommunications regulator as per 21st Century Business Herald, citing the Ministry of Industry and Information Technology (MIIT).
  • As a result, the MIIT suspended a cooperative partnership with the cloud unit regarding cybersecurity threats and information-sharing platforms, to be reassessed in six months and revived depending on the company's internal reforms.
  • China had already ordered state-owned companies to migrate their data from private operators like Alibaba and Tencent Holdings Ltd TCEHY to a state-backed cloud system by 2022.
  • Alibaba Cloud recently discovered a remote code execution vulnerability in the Apache Log4j2 component, notifying the U.S.-based Apache Software Foundation.
  • MIIT received a report from a third party about the issue rather than from Alibaba Cloud.
  • Analyst Rating: CLSA analyst Elinor Leung reiterated an Outperform on Alibaba with a $250 price target, implying 103.3% upside. The re-rating follows Alibaba's investor day.
  • CEO Daniel Zhang reiterated Alibaba's three strategic engines, China consumption, globalization, and technology.
  • Zhang believes China's consumption can continue to grow and that cloud "is the next big growth pillar."
  • AliCloud "enjoys unparalleled competitive advantages and a strong technological lead," says Leung. Leung views Alibaba as cheap at current levels.
  • Related Content: Read Why Goldman Sachs Is Bullish On Alibaba After Its 2021 Investor Day 2
  • Price Action: BABA shares traded lower by 3.69% at $118.44 in the premarket session on the last check Wednesday.
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