Shares of GoPro fell as much as 7 percent Tuesday after a Morgan Stanley note said the company's adventure cameras aren't improving fast enough to keep up with market expectations.

"Improvements in camera usability have not been able to sustain demand, and with limited earnings power, we think the market is giving too much credit to GoPro's strategic value," the company said in the note.

Morgan Stanley downgraded the stock to an Underweight rating and lowered the price target to $5 from $9.50.

"Whether by itself or within another ecosystem, GoPro's value is tied to its usability, and its earnings power remains at risk at the current pace of functional improvements," the note said.

CNBC reported earlier this month the camera maker had hired JP Morgan to pursue a sale.

Morgan Stanley said in Tuesday's note it has "no knowledge of a potential transaction."