The greatest barrier to the full exploitation of the cannabis market in the US is the patchwork quilt of various legalization regimes in the country. Cannabis is fully illegal in 9 states, fully legal in 11, and subject a variety of laws in the remaining 30. Some states permit medical use, some permit medical use of CBD extracts only, while others have partially decriminalized it. At the Federal level, marijuana remains fully illegal as a Schedule 1 Controlled Substance, but the closely related hemp plant was fully legalized at the Federal level by the 2018 Farm Bill.

The legalization of hemp opens exciting prospects for cannabis in the US. Aside from its industrial uses – hemp can be used in the manufacture rope, fabrics, and paper, to name just a few – the plant is a major source of cannabidiol extracts, the CBDs that are quickly becoming popular in medicinal use. CBD, being legal, is starting to take off in the marketplace, and those cannabis companies with a focus on this non-psychoactive compound will find themselves well-positioned to take off with it.

And they are sure to take off - a study by BDS Analytics predicts the CBD market reaching $20 billion annually by 2024. BDS' Jessica Lukas sees the market expanding across a variety of categories in the next near future, including food, candy, beverages, and skin and beauty. She says, "While dispensaries and e-commerce drive the majority of cannabinoid sales today in the US, this shifts versus the next five years."

We’ve delved into TipRanks’ database to find three companies that are ready to gain on CBD.

Aphria, Inc.

Aphria (APHA – Get Report) astounded the markets back in early August, with a C$20 million top-line beat in the quarterly report, and better yet, a quarterly profit of C$15.8 million. The profit line represented a C$29.7 million beat – the forecast had been for a C$13.9 million net loss. It was an impressive quarter for the third-largest producer in the global cannabis markets.

Aphria offers investors two other important features, besides a turn to profitability. First, the stock is available at a low price, just $6.16 on the New York market. And second, Aphria has leveraged its scale into partnerships with the US CBD markets. Aphria’s CBD products are based on marijuana-derived hemp, so the Canadian-based company faced trade hurdles in addition to the legal patchwork in the States – but a shift to hemp-based product, or Federal legalization of CBD, will put Aphria in a strong position to expand its operations quickly.

Writing of the company just after the quarterly report, Canaccord Genuity analyst Matthew Bottomley described the “solid rebound in cannabis revenues” as a “pleasant surprise,” and went on to note that increased efficiency in packaging and distribution had improved gross margins. Backing up his buy rating and $12 price target, Bottomley wrote, “Although we were discouraged in the previous quarter, we believe Aphria’s strong FQ4 indicates that the company is still competing for a top-three spot in the Canadian cannabis market.” His price target suggests a robust 95% upside for Aphria.

More recently, 3-star analyst Justin Keywood, of GMP FirstEnergy, initiated coverage of APHA. He was impressed enough by the stock to start it with a buy rating and a price target of $10.50. His target suggests an upside potential of 71%.

APHA’s consensus rating is a Moderate Buy, based on 4 reviews from the past three months. The reviews include 2 buys, 1 hold, and 1 sell. APHA shares sell for $6.16, and the average price target of $7.79 indicates a 26% potential upside for the stock.

Charlotte’s Web Holdings, Inc.