NEW YORK (Real Money) -- Ten years ago today, Google (GOOGL - Get Report) launched its initial public offering at the equivalent of $42.50 a share and it's been off to the races ever since, with the stock hitting $597 today.
That's a remarkable run, one that has far exceeded the stock market's performance, and I think it's fair to say that it's a performance that's been remarkably underestimated by so many people, including thousands of investment professionals, pretty much the entire way.
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From the very beginning there's been an amazing failure of imagination when it came to visualizing what this company can do and how much money it can make doing it. This failure of imagination isn't unusual when it comes to technology. For example, all week on "Mad Money" we are examining the remarkable energy renaissance in this country, which is largely because of a revolution in American drilling technology. It's been underestimated pretty much ever since it started, with both the amount and the profits available to the domestic companies far greater than most thought just three years ago.But Google's unique in how many people didn't trust it from the get-go. A perusal of the research at the time of its offering shows a mixture of weak Buys, some Holds and a couple of Sells. That's because the analysts showed a level of skepticism about the company and its prospects that was, in retrospect, both ridiculous and obtuse. They almost systematically believed that the market for Google's wares was much smaller than it turned out to be. They placed heavy bets against Google and in favor of Yahoo! (YHOO) and Microsoft (MSFT) , dramatically overstating the power of the competition. Almost universally they fretted about the lock-up, the number of shares that would ultimately be unleashed on the market after half a year. Many damned the company as immature in its actions, in part because its executives were so young, but also because its offering was done without the help of major brokers, in an auction. The company lacked Wall Street backing because of the rebellious streak that continues to this very day. But most importantly, the analysts looked at the world as a relatively static place, a world where Google would be competing for a small portion of the advertising market that would come from the television and print world and land right on your desktop, largely in ineffective banner ads augmented by some rebate payment that advertisers might be willing to pay Google in return for renting keywords in the Google lexicon. They were wrong from the get-go, with earnings estimates that were about half of what they turned out to be even a few years from when Google launched. The estimates in what we call the out-years were so low that the stock seemed incredibly expensive from the day it came public, when, in actuality, at its launch price the stock was selling at about 6x the earnings it racked up just three years later. Six times! Not long after I made those projections, I found myself being questioned by many in the business, including people in a position of authority, about why I could be so outrageously positive in my statements about the company. We had just come through a very bad time where trillions had been lost in technology stocks and no one seemed to want to hear a pundit talk about how a stock could double in a short period of time. I, in a rather matter-of-fact way, said to anyone that questioned my analysis that I envisioned a world where Google would get a minimum of 10% of the $600 billion advertising market because it just was superior to every other company on the Web in every single way. I told questioners that if they had kids they would know that Google had already become so pervasive that many a homework assignment I helped my kids with point blank said "no Googling allowed." Google wasn't just a verb, it was a forbidden verb. Read More: Google 10 Years After IPO Continues to Reshape the Future