The analyst behind a bullish call on the battered Canadian cannabis space is predicting near-term weakness, adding to pessimism hanging over the sector as the heavyweights get ready to report quarterly numbers this week.

Canada’s four largest pot companies by market value will report results for the quarter ended Sept. 30 this week. Cronos Group (CRON.TO)(CRON) will report before the opening bell on Tuesday, and Tilray after the markets close. Thursday will be bookended by Canopy Growth results in the morning and Aurora Cannabis results in the evening. 

“Expect weakness from this earnings season,” Cantor Fitzgerald’s Pablo Zuanic wrote in a note to clients on Sunday. “We are generally below consensus, in part because of management commentary, and also because while data shows solid underlying trends at the end consumer level, the provinces buying offices continue to adjust inventories.”

This followed on a note from Zuanic last Monday that he is calling "the bottom on Canadian cannabis stocks," citing a long list of tailwinds ranging from improved recreational sales, to sector consolidation, and more attention from major consumer packaged goods companies. 

The New-York based analyst initiated coverage on Aphria (APHA.TO)(APHA) and Organigram (OGI.TO)(OGI) with an “overweight” rating; Aurora Cannabis (ACB.TO)(ACB), Tilray (TLRY), and Canopy Growth (WEED.TO)(CGC) with a “neutral” rating; and HEXO (HEXO.TO)(HEXO) with an “underweight” rating.

He now warns that shipments by licenced producers to provincial warehouses may not reflect the current uptick in consumer spending on pot as some provinces overstocked initially, and continue to unwind that inventory. 

“Some provinces... are now fine-tuning specific formats and strains, or may now want to clear space for 2.0 [vapes, edibles, drinks, etc.],” Zuanic wrote. “We understand some provinces also have 120 days to return goods.”

Bank of Montreal analyst Tamy Chen shares those concerns, and expects industry-wide sales to provincial wholesalers to drop 20 per cent quarter-over-quarter. She also notes that some of the larger licenced producers have issued “cautious commentary” on their near-term revenue expectations.

Chen maintains speculative “market perform” ratings on Cronos Group, Canopy Growth, Aurora and Tilray. 

Last month, Cowen analyst Viven Azer slashed price targets across the board on the Canadian cannabis companies she covers. Azer said growth in the sector has come in below expectations, despite sales moving higher. 

“As investors continue to reset expectations in Canadian cannabis, we look for indications of incremental progress from the LPs heading into calendar 3Q19 earnings,” she wrote in a note to clients. “As such, having already reset our expectations and lowered our numbers, we look for indications on whether category headwinds are beginning to abate.”

Competition in the sector is set to intensify into 2020, even as more retail stores open and value-added next generation pot products hit shelves, according to Canaccord Genuity analyst Matt Bottomley.

“It is clear to us that many producers will be competing for a piece of a finite pie,” he wrote in an Oct. 31 research note. “We have made substantial downward revisions to virtually all our Canadian LPs under coverage.”

Bottomley maintained a “hold” rating on Cronos, but lowered his price target to $13 from $17. He maintained a “speculative buy” rating on Canopy Growth shares, and dropped his price target to $40 from $60. He also maintained a “speculative buy” rating on Aurora shares, and reduced his price target to $8 from $13.50.