The tumble in Twitter's stock—resulting in its second-worst trading day ever—boils down to fear of the unknown, JMP Securities analyst Ronald Josey said Wednesday.
The bottom line: Twitter's decision to change the way it scores advertisements on its platform has disrupted its core business, and investors are uncertain when that transition will bear fruit, Josey said.
"Over time, from an advertiser perspective, you really do want to pay for better quality leads as opposed to more quantity of leads," Josey said on CNBC's "Squawk Box." "Frankly it's the right thing to do longer term. The question is how much of a disruption in the short term is it going to be?"
During its conference call Tuesday, Twitter said its new direct-response ads, intended to encourage actions such as clicking on a link to an advertiser's website, did not produce the revenue expected. Advertisers limited their spending, and the click rate on Twitter's ads fell, but the company expects improvement in the second half of 2015, Chief Financial Officer Anthony Noto said on the call with analysts.
"Because of what this quality score did, and the change of perception in terms of quantity versus quality, it impacted overall click-through rates, and I think that's what drove some advertisers to the sidelines," he said.
Twitter said Tuesday that revenue jumped 74 percent to $436 million from the year-earlier period, but that top line figure came in below even the most pessimistic of the 36 analyst estimates compiled by Thomson Reuters.
The company's second-quarter revenue outlook of $470 million to $485 million was also well below the average Wall Street forecast of $538 million.
Shares of Twitter closed Tuesday 18 percent lower after earnings leaked ahead of schedule. The stock is down slightly in premarket trading Wednesday.
—Reuters and CNBC's Jacob Pramuk contributed to this article.