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What investors need to hear from Twitter: Analyst

Twitter users have been aflutter over rumors the social media company will change the way tweets pop up, but management should look through the noise and go for it, Axiom Capital Management's Victor Anthony said Wednesday.

The Internet analyst spoke ahead of Twitter's earnings report, scheduled for after the closing bell. With investors in fits over anemic user growth and preparing for weak 2016 guidance, Twitter must accelerate its product changes, Anthony said.

A tweet storm ensued last weekend after Buzzfeed reported Twitter's signature 140-character messages would no longer appear in real time, but would instead be managed by an algorithm that would display tweets by determining their relevance to users.

"An algorithmic change, I think, servicing the best content relevant to that particular user I think would go a long way. Facebook has done it and I think it's worked pretty well," he said.

Anthony said he believes Twitter CEO Jack Dorsey will ultimately push through the change, noting that in his response to the uproar, Dorsey only said the company would not introduce the algorithm in the coming week.

All the big social media companies have introduced changes to their services that initially faced backlash, Anthony noted, but users ultimately grow accustomed to the updates.

Anthony said Twitter does face challenges to executing its plans this year following the exit of several senior managers since Dorsey was reinstated as the permanent chief executive in October. But product updates are necessary for Twitter's stock to move higher, the analyst said.

Shares of Twitter are down nearly 38 percent this year. Analysts are expecting the company to deliver earnings per share of 12 cents on revenues of $710 million for the fourth quarter.

Anthony ultimately expects Google-parent Alphabet to make a bid for Twitter this year. Though the two already have a deal to display tweets in Google's search results, a full-out purchase of Twitter would allow Alphabet to more firmly establish itself in social media, where it has missed out on the trend its efforts with Google Plus, he said.