Cellular Goods shares: should I buy for my portfolio?

Cellular Goods shares listed on the London Stock Exchange last week via an IPO. Here, Edward Sheldon looks at the investment case.

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One UK stock that’s hot right now is Cellular Goods (LSE: CBX), which listed on the London Stock Exchange last week. Yesterday, CBX was the third-most viewed stock on Hargreaves Lansdown’s investment platform.

Is this a growth stock I should consider for my own investment portfolio? Let’s take a look at the investment case.

Cellular Goods: what’s all the fuss about?

Cellular Goods is an innovative company that’s developing skincare and athletic recovery products formulated with engineered cannabinoids. The company – which currently has a market-cap of around £65bn – is partly owned (5%) by global celebrity David Beckham through DB Ventures.

Cellular Goods’ USP is its products are lab-made. This means that every batch is identical and free from pesticides, contaminants, and impurities. The company plans to sell its products direct to consumers via its website and through partnerships with retailers. It says its supply-chain is ‘clean, green, short, and traceable’.

CBX is led by CEO Alexis Abraham who has experience in strategic branding, communications, and internet-enabled businesses. Meanwhile, its head of Research & Product Development is Alexia Blake, who is a pioneer in the North American cannabis industry with a proven track record of developing top products. She previously worked at MedReleaf Corp. MedReleaf was one of the first Canadian producers of medical cannabis to receive a license from Health Canada. Peter Wall, who is the CEO of Argo Blockchain, is chairman.

I’m bullish on cannabis

In a recent article on Kanabo Group, I explained that I’m quite bullish on the prospects for the legal cannabis industry as a whole. Cannabis isn’t a cure, but is being touted as having some impact — however small — when treating a wide range of conditions. These conditions include Alzheimer’s, Parkinson’s, arthritis, chronic pain, epilepsy, anxiety, and depression. Between now and 2026, the global legal cannabis market is projected to grow at an annualised rate of more than 30%. This means there should be plenty of opportunity for astute investors.

Having said that, I have reservations about investing in Cellular Goods shares. For starters, the company hasn’t sold any products yet. This means its products are unproven. It also means there’s no revenue at present. This adds a lot of risk to the investment case, in my view, as we simply have no idea how high sales will be. So, determining the right valuation for the company isn’t easy. 

Another issue is that it’s hard, at this stage, to determine if the company has a genuine competitive advantage. Having done some research, I think it’s likely that, in the years ahead, we’ll see more lab-based cannabis products come to the market.

CBX shares: should I buy?

Weighing everything up, Cellular Goods shares are too risky for me right now. The company certainly looks to have growth potential. However, there are many unknowns.

All things considered, I think there are other, safer growth stocks I could buy right now that are a better fit for my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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