MKM Partners initiated coverage of five Canadian cannabis companies and two U.S. multi-state operators on Friday with a cautious outlook, arguing that the nascent industry is likely to see supply exceed consumer spending growth, putting pressure on the current business model. Analyst Bill Kirk, an executive director at MKM, assigned sell ratings to Curaleaf Holdings Inc. /zigman2/quotes/205334348/delayed CURLF -0.38% /zigman2/quotes/203485866/delayed CA:CURA -1.20% and Aurora Cannabis Inc. /zigman2/quotes/210559470/composite ACB +7.76% /zigman2/quotes/203734337/delayed CA:ACB +7.81% , put neutral ratings on Canopy Growth Corp. /zigman2/quotes/200603886/composite CGC +5.22% /zigman2/quotes/202205609/delayed CA:WEED +4.96% , Tilray Inc. /zigman2/quotes/209129655/composite TLRY +3.50% , Cronos Group Inc. /zigman2/quotes/206842762/composite CRON +5.48% /zigman2/quotes/202715342/delayed CA:CRON +5.17% , and gave buy ratings to Acreage Holdings Inc. /zigman2/quotes/205165963/delayed ACRGF +2.01% and Hexo Corp. /zigman2/quotes/206508254/composite HEXO +17.00% . "Among vice categories, cannabis is the most expensive on a per serving basis (C$2.14) followed by wine (C$2.10), cider (C$1.90), beer (C $1.47), and spirits/liquor (C$1.42)," Kirk wrote in a note to clients. "Despite what appears to be incremental demand, cannabis prices continue to fall. This does not bode well for profitability, especially considering the top-seven cultivators (growers) are already harvesting at a rate nearly equal to legal channel needs in Canada." The cannabis sector has had a rough summer with shares mostly selling off amid a rash of scandals and disappointing earnings. The ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ +3.67% has fallen 28% in the last three months, and is now down about 7% in the year to date, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.28% has gained 20%.