Investors sent Pinterest (NYSE:PINS) shares higher after the company released preliminary first-quarter results. The stock price increased nearly 12% based on better-than-expected revenue and user growth at the company.

Despite strong growth in the first quarter, Pinterest warned that it's facing similar secular ad market challenges as its larger competitors, Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR). Both social media giants said their advertising businesses were negatively impacted by the current environment. The uncertain market led Pinterest to withdraw its full-year 2020 outlook.

Despite the stock's recent surge and uncertainty in the advertising market, Pinterest is still attractive. Here's why.

A woman relaxing on her couch and using Pinterest on her iPad

Image source: Pinterest.

Strong user growth

At the midpoint of its rough estimate for first-quarter monthly active users, Pinterest grew its active accounts by nearly 26% year over year. That's in line with its fourth-quarter growth and better than the 22% it posted in the first quarter last year.

It's also faster growth than either Twitter or Facebook has reported, despite the former's strong acceleration in user growth over the last few quarters.

It's interesting that Pinterest continues to see strong engagement as user interests shift (at least temporarily) amid the coronavirus pandemic. Twitter and Facebook are obvious beneficiaries of heightened interest in news and staying in touch with friends. Pinterest may benefit from consumers' increased interest in home decorating or more comfortable clothing now that we're all spending more time indoors.

In fact, heightened engagement on Pinterest may be a more delayed response to coronavirus as consumers become fatigued by the news and other updates on Twitter and Facebook.

However, Pinterest's task will be to convert increased engagement while consumers are home into long-term users. That's something it has struggled with in the past, but it's made significant product improvements over the past year -- such as home feed recommendations and personalized search -- in order to shore up its retention rate.

Shifting focus to user monetization at the right time

Pinterest's user base remains under-monetized compared to larger companies such as Facebook. It has kept its ad load very low, and as a result, its average revenue per user was just $1.22 in the fourth quarter. Monetization is significantly higher in the U.S. ($4.00) versus international users ($0.21). Still, Pinterest sorely lags behind Facebook, which posted ARPU of $8.52 worldwide in the fourth quarter, including an average of $41.41 in the U.S. and Canada.

Scaling its advertising business and attracting more small and mid-sized and international companies to its ad platform is one of Pinterest's strategic priorities for the year. And the coronavirus pandemic may ultimately present an opportunity for the company to attract marketers just as they're looking to optimize their limited ad spend.

Importantly, Pinterest is least exposed to areas where advertising was hit hardest. "Our exposure to some of the most affected segments like travel, automotive, and restaurants has not been significant," CFO Todd Morgenfeld said. Meanwhile, it's overly exposed to consumer-packaged goods companies and fashion companies, which should be less vulnerable in the current environment. As such, Pinterest should see a smaller negative impact than the overall market on demand for its ad products.

Pinterest looks especially strong after its first-quarter update. While revenue will certainly see a big drop in the second quarter, it might not experience as big of a dip as its competitors. That's thanks to its under-exposure to the worst-hit industries and overexposure to some of the least-affected industries. Along with strong user growth and its relatively low user monetization at this point, that suggests there's a lot of room for Pinterest to show better overall ad revenue resilience than the rest of the industry. And when ad spending returns to normal, Pinterest should be a big winner.