The Chinese Ministry of Industry and Information Technology (MIIT) has suspended its cooperative partnership with Alibaba Group Holding Ltd.’s (BABA) subsidiary Alibaba Cloud Computing following its failure to report and address a cybersecurity vulnerability, according to a report by Reuters citing 21st Century Business Herald.
The telecommunications regulator said that Alibaba Cloud failed to immediately report vulnerabilities in Apache Log4j2, its open-source logging tool, to the ministry. The Java-based tool is used in enterprise systems and web applications.
The partnership, which was related to cybersecurity threats and information-sharing platforms, is scheduled to be reassessed in six months based on the company’s internal reforms.
The ministry said, “This vulnerability may lead to remote control of equipment, which may lead to serious harms such as the theft of sensitive information and interruption of equipment services. It is a high-risk vulnerability.”
Alibaba Cloud notified the U.S.-based Apache Software Foundation after discovering a remote code execution vulnerability in the tool. However, the regulator said that it did not receive a report about the issue from Alibaba Cloud but rather from a third party.
Following the news, Alibaba’s shares were trading nearly 4% lower at the time of writing in the pre-market session.
About Alibaba Cloud
Alibaba Cloud provides cloud computing and artificial intelligence services to enterprises, developers, and government organizations in more than 200 countries and regions across the world.
Wall Street’s Take
After the release of the news, Daiwa analyst John Choi maintained a Buy rating on the stock along with a $170 price target (38.2% upside potential).
Further, CLSA analyst Elinor Leung reiterated a Buy rating on Alibaba with a price target of $250 (103.3% upside potential).
Leung said, “CEO Daniel Zhang believes China’s consumption can continue to grow and that cloud is the next big growth pillar.”
Overall, the stock has a Strong Buy consensus rating based on 22 Buys and 3 Holds. The average Alibaba stock forecast of $203.65 implies 65.6% upside potential. Shares have lost around 52% over the past year.
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Alibaba’s performance.
According to the tool, compared to the previous year, Alibaba’s website traffic registered a 10.1% decrease in global visits in November. However, website traffic has increased 1.7% year-to-date versus the same period last year.