NEW YORK (TheStreet) -- Twitter (TWTR) - Get Report shares are up 1.33% to $50.16 in trading on Thursday following reports that the social media company is set to pass Yahoo (YHOO)  for third place in U.S. online ad sales this year, according to the Wall Street Journal.

Twitter is expected to increase its share of U.S. online ad revenue to 5% from 3.6% this year, according to the Journal, which cited a report by independent market research firm eMarketer, coming in third behind Facebook  (FB) - Get Report,25% market share, and Google (GOOGL) - Get Report, 13% market share.

One of the reasons for Twitter's increased revenue is the relatively new app-install advertisements that show up anytime a user downloads the company's app to their mobile devices. eMarketer estimates that that type of ad revenue will generate at least another $3 billion in the U.S. this year.

Yahoo will lose its third place position, which it has held for the past four years, as its market share declines to 4.6% this year from 5.5% last year.

Also, the company announced the launch of its live streaming video app, Periscope for Apple (AAPL) - Get Report devices today with an Android version expected later this year. The move is seen as a direct response to the good press rival service Meerkat following its presentation at last week's SXSW tech conference.

Twitter acquired Periscope for $100 million in January.

The Street's Jim Cramer, Portfolio Manager of Action Alerts PLUS Charitable Trust Portfolio, believes that Twitter will continue to gain in popularity due to its prominence as a tool used in mass media and the free publicity that it receives as a result.

Here's the deal with Twitter. Everyone in the media wants his or her Twitter handle displayed prominently. Normally Twitter would have to pay for that publicity. Nope. it's the other way around, people want to give them publicity. Soon we will all use Twitter as our personal news service as we curate all of these people into or own feeds. That's going to be exceptionally lucrative for this company.

TheStreet Ratings team rates TWITTER INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TWITTER INC (TWTR) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TWTR's very impressive revenue growth greatly exceeded the industry average of 18.6%. Since the same quarter one year prior, revenues leaped by 97.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TWITTER INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TWITTER INC continued to lose money by earning -$0.96 versus -$1.05 in the prior year. This year, the market expects an improvement in earnings ($0.39 versus -$0.96).
  • Despite currently having a low debt-to-equity ratio of 0.44, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 10.26 is very high and demonstrates very strong liquidity.
  • Compared to other companies in the Internet Software & Services industry and the overall market, TWITTER INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • TWTR has underperformed the S&P 500 Index, declining 6.46% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: TWTR Ratings Report

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