Benzinga | Dec 22, 2021 06:01AM EST

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

Chinese regulators suspended an information-sharing partnership with Alibaba Group Holding Ltd (NYSE: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 (OTC: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.