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Right now, the TWTR stock price is trading at all-time lows before Q4 2015 earnings are announced on Feb. 10.
The Twitter stock price opened at $15.51 this morning (Monday) and quickly fell by 3.8% in intraday trading. Part of the reason for the TWTR stock drop was CEO Jack Dorsey announcing plans to change Twitter's algorithm on how tweets are viewed.
Dorsey wants users to see tweets that the algorithm feels are most relevant to them, which would do away with the current chronological order.
Twitter Inc. (NYSE: TWTR) users created the hashtag #RIPTwitter over the news, and Dorsey sent out this response:
This potential change highlights a fundamental flaw with Dorsey's company. And this flaw is going to make the TWTR stock price fall even further after earnings.
But before we get to that, it's important for Money Morning readers to understand why the Twitter stock price has already dropped 67.8% over the last 12 months.
And that reason is Wall Street's lack of faith in Jack Dorsey…
There were major concerns when Dorsey became permanent CEO in October over whether or not he could handle running Twitter and his other company, Square Inc. (NYSE: SQ), at the same time.
Dorsey obviously had a lot of experience with Twitter, as he was a co-creator and the original CEO until 2008. But not only does he have the challenge of turning Twitter around, he also has to make Square shareholders happy following the company's Nov. 19 IPO.
And Dorsey's attempts to make the social media site easier to use and increase monthly active users (MAUs) have not worked….
In fact, Business Insider reported on Feb. 2 that the number of tweets per day has fallen by more than half since August 2014.
Now investors are turning their focus to Q4 earnings. Analysts expect the company to report earnings per share (EPS) of $0.12 on revenue of $479 million.
And after Q4 earnings, this one fundamental flaw could make the TWTR stock price fall even further…
TWTR Stock Price Has Further to Drop After Q4 2015 Earnings
Dorsey changing the timeline highlights Twitter's fatal flaw: The company doesn't know what it wants to be.
In Nick Bilton's 2014 book "Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal," he showcased that Twitter was always going to be in trouble.
Former CEO and co-founder Evan Williams always believed that Twitter's power was its real-time sharing feature. Williams thought that Twitter was a way for people to show what was happening in the world.
Dorsey disagreed with this view. He always thought that it was a tool to share what an individual was doing and what was personally happening to them, similar to the narcissism approach of Facebook Inc. (Nasdaq: FB).
Taking away the order of how tweets are organized blurs the lines of what exactly Twitter is and what it hopes to accomplish even further. This makes it an even more confusing platform for advertisers.
Dorsey is also experimenting with removing the 140-charcter restrictions Twitter is known for and allowing up to 10,000 characters.
These changes are meant to provide Wall Street with an answer to how the company plans to improve, but these are just desperate moves that are being thrown at the wall to see what sticks.
Even if Twitter exceeds expectations on Feb. 10, that doesn't mean the TWTR stock price will climb. For Q3, analysts had expected the social media company to report $0.04 on $559.6 million in revenue. Twitter reported $0.10 on $569.2 million, but the stock price still dropped 10% at the opening bell the next morning.
Money Morning Chief Investment Strategist Keith Fitz-Gerald has told investors to short Twitter stock since 2013, and it's fallen 75.49% since Fitz-Gerald's recommendation. Now he has a big announcement on what you should do with TWTR right before earnings…