In an earnings season full of surprises, Pinterest (NYSE:PINS) has been one of the biggest so far.

Shares of the virtual pinboard operator surged following its second-quarter earnings report, finishing up 36.1% on Friday as the company reported a spike in user growth and strong revenue growth in July.  

For the quarter past, Pinterest's top line ticked up 4% to $272.5 million, improving throughout the quarter as the impact of COVID-19 faded, and easily topped the analyst consensus at $251.2 million. On the bottom line, its adjusted EBITDA loss expanded from $26 million in the quarter a year ago to $33.9 million, and it reported an adjusted loss of $0.07 per share, beating estimates at a $0.13 per-share loss.

However, the user growth was the real highlight of the quarter, as monthly active users jumped 39% to 416 million, with solid growth in the U.S. and internationally. Revenue ripped higher to start the third quarter, jumping 50% through July 29, which management believed was at least partly driven by the Facebook (NASDAQ:FB) boycott. Management expects third-quarter revenue growth to moderate to the mid-30s from the strong start in July, but those predictions may prove to be conservative given the current momentum.  Let's take a closer look at these factors and others that show why this promising growth stock could continue to surge from here.

A woman looking at a Pinterest board on an iPad.

Image source: Pinterest.

1. User growth begets revenue growth

Users are the lifeblood of a social media business. Without them, the platform has no content and advertisers have no one to sell to. That's why user base may be a more important metric for social media businesses, especially emerging ones like Pinterest, than financial measurements like revenue and profit. 

Management attributed the strong user growth in part to lapsed users coming back to the site and users under 25, as the pandemic drove interest in categories like cooking, gardening, kids activities, and setting up home offices and gyms. Though engagement peaked in April and early May, it remained elevated for the duration of the quarter and into July, and those new users actually showed more engagement than previous ones, a sign that they'll continue using the platform.

While the company said that user growth would decelerate from here because it was elevated by the pandemic, the jump in its user base will make it more attractive to advertisers and give it a larger platform from which to generate revenue.

2. The Facebook boycott is a unique opportunity

Even though revenue growth soared to 50% in July, management downplayed the impact of the Facebook boycott, pointing to drivers like the economic recovery, an increase in advertising demand in areas like consumer packaged goods, and strategic investments and new product rollouts. CFO Todd Morgenfeld said the majority of the growth was due to an increase in advertiser demand unrelated to the boycott.

However, he did note the company's unique characteristics that make it attractive to the long list of advertisers that have pulled advertising from Facebook in protest over its alleged spreading of political misinformation and hate speech. Morgenfeld said: "The boycott has given us an opportunity to win some budgets and to educate advertisers about how and why Pinterest is different. And while other platforms are at the center of political and free speech debates, people come to Pinterest to think optimistically about their futures." 

Pinterest doesn't allow political advertising and has other rules to help create a positive ecosystem, making the platform a good option for advertisers looking for alternatives to news-driven or influencer-driven sites like Facebook, Instagram, and Twitter.

3. New products are delivering results

Pinterest stock is appealing in part because the company has only just started to monetize its user base, especially internationally. Outside the U.S., average revenue per user tripled from $0.11 to $0.34 in the second quarter, helped by investments in Western Europe. Elsewhere, the company has deployed new tools to help advertisers, like an auto-bid tool that has led to increased advertiser spending, and the company is planning to roll out more auto-bid tools in the coming months. 

New conversion optimization and shopping ad products are also delivering strong growth, and shopping within the app holds particular potential for Pinterest, as the site naturally lends itself to commerce. In fact, the company said many of its users have reported they would like to shop for the same items they see on Pinterest boards. The company rolled out an integration with Shopify in May that increased product catalog viewing by 350% from the first quarter, and product-only searches were up eight times in the first half from a year ago.

Tapping into e-commerce may be Pinterest's greatest potential market, and the company has a unique ability to guide users through discovery as people come to Pinterest to learn more about a certain subject. They know they want a wedding dress, for example, but aren't sure which one, presenting an opportunity for dressmakers.

With its growth from e-commerce, new advertising tools, surging user base, and ecosystem that avoids many of the controversies that have nagged other social media platforms, Pinterest looks poised for strong growth over the coming years. Don't be surprised if the company delivers more days like last Friday.