The U.S. cannabis market enters 2020 with plenty of catalysts for higher sales and better profits for industry participants. One of the primary ways to benefit from immediate growth in the sector is via state level approval of medical or recreational cannabis sales while the Federal government slowly pushes towards eventual Federal approval.

The recent start of recreational cannabis in Illinois and Michigan are prime examples of how U.S. multi-state operators (MSOs) can immediately benefit from having existing cannabis operations in a particular state. The state had an estimated $200 million in medical marijuana sales with research predicting sales surging to between $2 billion and $4 billion with adult-use cannabis legalized starting January 1.

The U.S. currently has 11 states with recreational cannabis approved with over 30 states approving various forms of medical cannabis. The easy path to legislative approval lies within these states with existing medical cannabis programs. A primary target being large states such as Arizona, Florida and New York.

As a prime example, Florida has a medical cannabis program already with 300,000 registered patients and 2,600 prescribing doctors. Activists attempted to get a proposed amendment to make adult-use cannabis legal on the 2020 ballot, but voters supporting recreational cannabis at 65% rate might not get the ability to vote until 2022. The ultimate path to legalization appears clear and companies positioned in the Sunshine state will eventually benefit.

We’ve delved into these three smaller U.S. MSOs poised to benefit from existing medical cannabis states approving expanded adult-use sales. According to TipRanks’ Stock Comparison tool, all three currently have a Strong Buy consensus rating and over 70% upside potential.

Columbia Care (CCHWF)

Columbia Care is one of the few smaller MSOs set to benefit from both legalization of recreational cannabis in Illinois and the potential addition of Florida in the future. Most MSOs don’t currently operate in both states.

The company recently reported that initial January sales in Illinois grew more than 100% with transactions up an incredible 260%. Adult use sales exceeded medical sales by an incredible ratio of seven to one. The average basket size was down to ~$81 from $110 in the previous medical only program.

The initial sales are promising, but Columbia Care has plenty more to entice investors. The company will open a second dispensary in Illinois soon and recently added four new dispensaries in Florida back in November with the plan to add another 13 locations by the end of 2019. The company expects to have 22 locations open in Florida with 2 manufacturing facilities.

All of these additional sales come on top of Q3 sales of $22.1 million. Columbia Care has operations in 12 jurisdictions with plans to expand into 15.

The stock has a market valuation of $780 million with analyst estimates for 2020 revenue of nearly $250 million. Columbia Care ended Q3 with $85 million in cash and recently completed a $35 million funding leaseback of six properties in California, Illinois and Massachusetts. The company appears well funded for growth in 2020.

The cannabis player is without question a Wall Street favorite, considering TipRanks analytics indicate the stock as a Strong Buy. Out of 4 analysts polled in the last 3 months, all 4 are bullish on Columbia Care stock. With a return potential of nearly 160%, the stock's consensus target price stands at $9.47. (See Columbia Care's price targets and analyst ratings on TipRanks)

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