No, Lance Armstrong Axing Doesn't Make Nike's Stock a Buy

I have been pleasantly surprised by the amount of questions in the email inbox on whether to buy Nike's stock now that it severed ties with Lance Armstrong. Hey, I am a firm believer that investors should drill into the stories of companies deeper, so don't blame those wondering if Nike is suddenly “attractively valued.” But, woh Nelly, step back for a second and think logically on this subject. What has happened with Nike is not a “headline risk” that will materially impact future earnings or cash flows. For an example of a “headline risk” that could impact these things, see Wal-Mart's unknown outcome regarding its Mexico bribery scandal. Nike is a global footwear company first and foremost, surrounded by ranges of apparel and accessories offerings that cater to specific consumer needs and wants. One of those needs/wants is cycling gear, a category that is more niche than fundamentally important to Nike and its go forward strategy. Now, if Nike for some reason cut loose Michael Jordan, LeBron James, or Tiger Woods that would be of interest to me as events that stand to harm future sales and earnings streams. Love the dot-connecting, but feel it's misplaced on this particular subject. The Real Reasons Not to Buy Nike! The supposed “best in breed” company has performed anything but in terms of sales and profit margins going on over a year. Yet, the valuation on Nike is more growth stock based on the past (sort of like Tiger Woods) than current and medium-term expected realties. Further, one must still have reservation on inventory levels in China, downside risk from Europe, and an inability to pass on enough price increases to offset manufacturing cost inflation (structural to China) and investments in research and development (specifically in the area of sneaker technology integration).