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Donald Trump’s forthcoming return to the White House and his nomination of pro-legalization (but not pro-Florida legalization) Matt Gaetz for attorney general adds a new dimension to the cannabis sector’s outlook. But stock performance remains tightly linked to state markets, said Pablo Zuanic, managing director at Zuanic & Associates, in recent research reports.

“With DJT2, we believe change will be gradual, with rescheduling to Schedule III quite likely but probably dragging on to late 2025,” Zuanic wrote. But he does see potential for the SAFE Banking Act to pass amid Farm Bill horse-trading.

Cannabis stocks fell sharply after the elections, as companies with heavy exposure to Florida, such as Trulieve Cannabis Corp. (OTC: TCNNF) and Verano Holdings Corp. (OTC: VRNOF), fell more than 40% since Nov. 4. However, others, including Cresco Labs (CSE: CL) (OTCQX: CRLBF) and Green Thumb Industries (CSE: GTII) (OTCQX: GTBIF), are only off 6-9%, which Zuanic said suggests they are a “barometer of the federal outlook” that “little will happen post the election.”

Among top MSOs, Green Thumb trades at 7x EV/EBITDA with 31% EBITDA margins on $287 million in third-quarter sales, up 2% quarter-over-quarter. Curaleaf Holdings (CURA: CA) (OTCQX: CURLF), the largest cannabis company by revenue, fetches a richer 10x multiple after booking $331 million in third-quarter sales.

Zuanic said “the longer the license-restricted model of state silos” stays, “the better for larger players,” though federal prohibition will still limit capital access, adding to headwinds from illicit markets and hemp-derived competition. Debt-to-sales ratios range from 7% at Green Thumb to more than 50% at Cresco and Curaleaf.

Meanwhile, unpaid federal taxes are distorting cash flows, he noted.

Even incremental positive regulatory moves could boost stock prices given current valuations, Zuanic said. However, Florida-focused operators may see an “overhang” after the ballot failure, impacting cannabis ETFs holding them such as AdvisorShares, which is carrying out a 1-for-20 reverse split for its MSOS Daily Leveraged ETF. The Nov. 26 split will reduce outstanding MSOX shares by roughly 95%, leaving investors with one share for every 20 they currently own, AdvisorShares said Friday.

“We understand the investor skepticism given the new administration’s various priorities,” Zuanic wrote, citing cabinet confirmation uncertainty and the “tug of war between the GOP’s historical prohibitionist leanings vs. DJT’s only recent and apparently opportunistic support for cannabis.”

Zuanic also posited that broad changes, like federal legalization, appear less likely under a Trump administration given how “disruptive” that could be to existing state markets. Still, the analyst kept overweight ratings on Cresco, Green Thumb and Verano.

For investors willing to stomach the volatility, he recommended a two-year wager on quality names positioned for gradual change in a second Trump term.