What happened

Shares of Yelp (YELP 2.23%) surged higher on Friday after financial results for the second quarter of 2022 beat expectations and management raised guidance for the rest of the year. As of 1:30 p.m. ET, Yelp stock was up 21%. And don't look now, but with today's gains, Yelp stock is actually beating the market average over the past year.

So what

Yelp is a local-business review platform, with 99% of 2021 revenue coming from the U.S. and 95% of total revenue was generated through advertisements. Many companies that generate revenue this way struggled in the second quarter. But not so for Yelp. The company generated net revenue of $299 million, up 16% year over year and far ahead of the $290 million at the high end of management's guidance.

Perhaps most surprising about Yelp's results was that ad clicks were down 11% year over year. Looked at in isolation, this is a bad thing -- ideally, clicks would go up and up. However, Yelp's ad monetization is improving, meaning it's making more per click. Q2 cost per click was up a whopping 32% year over year, which led to the revenue increase. 

Yelp is an under-followed small-cap stock. Evercore ISI analyst Shweta Khajuria raised Yelp stock's price target from $35 per share to $41 per share, according to The Fly. But other than this, Wall Street didn't take much notice. However, if the company can continue improving its monetization like it did in Q2, that could quickly change.

Now what

With the Q2 report, Yelp raised its full-year guidance by $20 million to a range of $1.18 billion to $1.2 billion. This is about 15% year-over-year growth on the low end and suggests its monetization strategy is expected to keep working for the remainder of 2022.

Of final import for investors is Yelp's solid financial footing. In Q2, its net income doubled to $8 million. And it has $421 million in cash and equivalents with no debt. Therefore, it's in a great position going forward.