Seattle's 5 Point Cafe is the first bar in the world to ban the (yet unreleased) Google (NASDAQ:GOOG) Glass, starting a trend that could effectively play down the current hype surrounding Google and heavily impact the stock, for the worse.
Glass is the shiny new gadget that Google is planning to release to the public by the end of 2013: in what is an impressive technical achievement, a computer has been clipped into a slim pair of metal eye-glass frames to create a pair of smart-glasses capable of taking pictures, stream videos and connect to social networks over wifi. But can an object that seems to come from a sci-fi movie like "Minority Report" or "The Matrix" appeal to the masses, break into the fashion schemes and overcome the skepticism of those who see it as a wrecker of basic human relationships? Many clues are pointing to a negative answer.
Up until now, wearable technology has been nothing more than a niche-market: it 2011, a total of 14 million wearable devices has been shipped, compared to 472 million smartphones. And while this number is expected to increase ten-folds by 2017, the past few years has showed us that people tend to have a difficult approach towards wearable technology. Think about 3D-glasses for example: 3D technology has yet failed to go mainstream and the main cause seems to be that people don't like 3D glasses. And what about Bluetooth devices for that matter? They simplify the need of holding a bulky phone to the head, they make driving while on the phone safer and they eliminate the risk of cancer (yet controversial) associated with heavy cell-phone usage. So why isn't everybody using them?
In a world obsessed by fashion trends, are people ready to wear a computer on their face? Fashion designers are saying that with this design, Glass is not going to be something that many people want to wear full-time. In fact, Glass doesn't try to hide the fact that it is a computer at all, as it resembles much more a tool, a device, than a pair of glasses. And for people who already wear prescription-glasses this could be a big issue.
Moreover, other than breaking the fashion trends, in order to be successful Glass has to improve people's lives. In the preview released by Google, Glass is used as a way to record videos in extreme-situations (skydiving in this case), clearly reminding of the GoPro, the "attach it to everything", "use it everywhere" video-camera. If we compare the two objects, though, Glass is clearly inferior in this field. While the GoPro doesn't have a wifi connection (functionality that could be easily added in the future), it can be used, in fact, everywhere. On the other side, going surfing with Glass (just to list one) might not prove to be extremely clever. Furthermore, in the video, the main input to control Glass seems to be the voice. Siri has already showed how voice-recognition isn't always reliable, especially in public places, where's there's a lot of noise disturbing the speaker. Given that Glass is presented as a full-time object, it might prove very difficult to control it other than in a quiet environment.
Even more so, Glass is shown while doing pretty simple things, like checking the weather, surf (somehow) the web and connect to Google +. All these things are already possible with a smartphone, and are probably much more easier to accomplish with a touch-screen than with the mere use of the voice. Google, in fact, has not yet really reasoned why somebody should want Glass if he/she already owns a smartphone, also because Glass is expected to cost more than twice the cost of a high-end smartphone, or approximately $1,500.
Privacy is even a bigger issue. 5 Point Cafe has banned Glass exactly for privacy matters, since the glasses allow users to record videos without allowing others to notice. And this also raises questions about basic human-relations: how is somebody supposed to know if a person wearing Glass is not focused on the shiny small screen above his right eye? If you're using your smartphone, the people surrounding you know that you're not probably paying attention to them. Glass makes this reckoning much more difficult, leaves a veil of diffidence and could really dent the basic human relation we are all used to.
What about laws furthermore? Will you be able to drive with Glass in front of your eyes given all the distractions it might provide you with? And given how privacy is handled, is it possible that states, instead of single bars, ban these glasses altogether?
Summing up, fashion seems to be telling that Glass is not a full-time gadget, and the object itself doesn't seem to bring up a radical new life-changing experience, while limiting itself to simple smartphone-tasks. How many people can afford to spend $1,500 for an object that they don't really need, which does not dramatically improve their lives and which contrasts so strongly the current fashion trends?
Besides, while there's has been a lot of rumors about how much profitable an Apple (NASDAQ:AAPL) iWatch might be, we have yet to hear from a single analyst quantifying the amount of money Google is going to make from this gadget: indeed, how much (if at all) Google is going to profit from Glass remains extremely fuzzy.
Furthermore, Google's stock seems a little bit stretched at these levels: shares have recently hit an all-time high on the wake of the last earnings beat and a general hype surrounding the company (partly due also to Glass). In the last 8 months, shares have risen 45%, giving Google quite a lofty valuation compared to other peers like Apple, and Microsoft (NASDAQ:MSFT) (see chart for reference).
Given that Google's EPS has risen an average of 10% for the last two years, the premium the stock is enjoying seems out of place. Looking at the technicals, the stock is in a nice uptrend (orange line in the chart). But as we can clearly see, after topping at $840, the stock seems now stretched even compared to the trend-line it has kept since November, signaling a possible retracement towards this baseline, which is currently standing at $810.
In conclusion, Google at current levels looks expensive, both on the fundamental and on the technical side. Analysts' estimates (on which the forward P/E metric is based, and which are not-GAAP, therefore not even reliable in my opinion) are extremely bullish since they're implying an EPS growth of 15% for two steady years, while it has grown just 10% in the last two years. This uptrend may continue, but the more the stock rises the more it gets expensive and the more it leaves room for a retracement to lower levels.
At these levels, I see more risks than benefits with Google.