In trading Tuesday, Snap’s stock price plunged nearly 9% to as low as $15.50 after banking giant Morgan Stanley (MS) downgraded shares of the disappearing photo app company to the equivalent of “hold.” That deepened losses for investors who bought into Snap’s initial public offering back in March. Those investors had already lost money on their investment as of Monday when Snap’s stock dipped below its $17 IPO price for the first time ever.

Morgan Stanley’s downgrade is a particularly hard hit for the company as the bank was the lead underwriter for Snap’s IPO, guiding the company through the process and helping determine its initial stock price. Typically, such underwriters become cheerleaders of the company after it officially goes public, authoring “buy” or “hold” recommendations. And Morgan Stanley was no exception.

Following Snap’s IPO, Morgan Stanley gave Snap (SNAP) the equivalent of a “buy” rating and a 12-month target price of $28—one of the most bullish on Wall Street at the time.

But now, the bank has lowered its price target by 43% to $16 a share. That’s well below Snap’s IPO price. (By Tuesday afternoon, Snap stock had already fallen below Morgan Stanley’s target.)

So why the change of heart? According to the note, Morgan Stanley analysts led by Brian Nowak are now less convinced of Snap’s ability to grow. In fact, the analysts effectively refuted the main reasons why Snap’s biggest champions believed in the company at all: its apparent scalability and unique platform.

“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,” Nowak wrote. “Snap’s ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing.”

Recently, Snap investors have grown increasingly wary of Facebook-owned Instagram. In late June, Facebook announced that its Instagram Stories feature, which competes with Snapchat, had reached 250 million daily active users—50% higher than the 166 million daily active user base Snap reported in May.

“We believe Instagram has become more aggressive in competing for Snap’s ad dollars,” Nowak wrote.

As a result, Morgan Stanley expects Snap to reach revenue of $897 million this year—far lower than the $1 billion it once expected. Moreover, Morgan Stanley expects the company to reach just 182 million active users by the end of this year.

The Morgan Stanley note also comes just a day after another of Snap’s IPO underwriters, Credit Suisse, lowered its target price on the company from $30 to $25, saying that Snap’s stock price could fall later this month when Snap’s lockup period begin to expire. That will allow many of Snap’s IPO backers and insiders to start selling their shares in the company.

Still, Snap has a chance to wow investors with stronger earnings figures. It’s possible the company is working behind closed doors on a project that could potentially unlock growth. As one user joked on Twitter:

https://twitter.com/jackdwagner/status/884490832094429184

That hot dog is in fact an augmented reality feature that recently hit Snapchat. It bobs, it dances, and it’s now an official meme.

Now if only the hot dog could sell ads for Snap.