Morgan Stanley analysts downgraded Snap on Tuesday, a day after the shares fell below their IPO price of $17.

This is particularly insulting because Morgan Stanley took the Snapchat parent public, and therefore priced the IPO at $17 a share. The analysts are separate from the underwriters, but it still creates an awkward appearance.

Shares of the social media company closed 8.95 percent lower at $15.47 a share after the call. A team lead by analyst Brian Nowak downgraded the stock to equal weight from overweight and slashed their price target to $16 from $28.

"SNAP's ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing," Nowak said in a note to investors.

"We have been wrong about SNAP's ability to innovate and improve its ad product this year (improving scalability, targeting, measurability, etc.) and user monetization as it works to move beyond 'experimental' ad budgets into larger branded and direct response ad allocations."