Cramer calls Morgan Stanley note on Snap stock an 'obituary'

Key Points
  • Morgan Stanley's downgrade of Snap was an "obituary," Jim Cramer says.
  • "If Facebook wants to smash Snap, it can do it," he says.
Instagram behind Snap downgrade: Cramer

A Morgan Stanley analyst's downgrade of Snap was an "obituary," and the social media company is struggling in the mobile ad space like Twitter, CNBC's Jim Cramer said Tuesday.

"Snap, crackle, pop," Cramer said on "Squawk on the Street." "This is (Mark) Zuckerberg going after them in a way that is only – it's not even imaginable what he is doing."

Cramer spoke after a team led by analyst Brian Nowak downgraded Snap's stock. Nowak said the company's ad product is "not evolving" as quickly as expected and "Instagram competition is increasing."

Shares of the parent behind Snapchat fell Tuesday on the news. Snap stock on Monday closed at $16.99, below its IPO price.

Snap CEO Evan Spiegel has had to come up with fresh features after Facebook cloned some of Snapchat's most popular themes. The company also has struggled, like Twitter, with Facebook's and Google's dominance in the mobile advertising space.

Cramer said in order for Snap to make a pivot, Spiegel must develop a product that's targeted to the "21- to 30-year-old."

"Because then I think you can own the liquor market. ... This thing is a little too underage. And it's viewed as being a little too subversive and it also has a certain way of delivering a message that Instagram is just directly copying," Cramer said.

"If Facebook wants to smash Snap, it can do it," he said. "This is becoming one the great busts of 2017."

Snap did not immediately respond to a request for comment.

— CNBC's John Melloy contributed to this report.

Disclosure: CNBC parent NBCUniversal is an investor in Snap.