Is the hype over for Cellular Goods shares?

Cellular Goods shares have been falling. But is now a buying opportunity? Here’s my view.

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Just a few months back, Cellular Goods (LSE: CBX) shares floated on the London stock market. There was a lot of hype around the stock. And I must admit I got sucked in by it.

Cellular Goods shares listed at 5p and shot up to approximately 20p. But as I write the stock price has fallen to just over 8p.

I’ve commented on the company before and highlighted that I was waiting for the euphoria to subside. I think the fall in the share price reflects the diminishing level of enthusiasm for the cannabinoid firm from investors.

As a general rule, I don’t get involved at or straight after an initial public offering (IPO). Especially if there are not many public companies I can compare the newly listed company to, which is the case for Cellular Goods.

The company has recently released an announcement but I’m still not convinced to buy the shares in my portfolio. For now I’ll watch from the sidelines but I reckon the stock is worth another look.

Latest developments

Last month, Cellular Goods announced the appointment of five new members to its team. This includes a Head of Process and Applied Sciences as well as two senior hires to its product development team. The company has also contracted two expert consultants to advise on the development of its pet care and skincare ranges.

Firstly, I was surprised to hear that it’s dipping its toe into the pet care market. I’m aware that the firm is young and ambitious but I’d thought it would be better to focus on getting the skincare range up and running.

Secondly, the company clearly has enough money from the IPO to strengthen its team. But for now, I reckon the pet care range is somewhat premature. 

The products

I think its worth noting that in its lengthy IPO prospectus, the company was initially targeting two product lines. The first being high-end skincare, and the second being athletic recovery products.

At this point, I’ll add that none of these have launched yet! So in reality, it has not proven that it can sell the items. Hence the firm is not generating any revenue and is loss-making.

It has the retired celebrity footballer, David Beckham, as an investor. I guess he could market the products, which could make them a success.

The company still states that it will launch the first of its skincare items in September 2021. According to the IPO prospectus, this includes a high-quality face-mask and serum containing synthetic CBD, which is the well-known cannabinoid. Well, I guess I’ll have to wait and see.

My view

The market is flooded with CBD products, so Cellular Goods faces stiff competition. As I mentioned, David Beckham’s celebrity status may help the products, but I think consumers are smart and know that he will gain financially from it.

I welcome the company improving its team. It’s a step in the right direction for Cellular Goods shares. After all, the new hires bring experience that can drive the firm forward.

I reckon the hype has died down around the stock and reality has set in. The products have yet to prove themselves and I’ll be watching closely to see how well they do. For now, I’m not buying the shares 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.

Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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