During the past year, Square Inc (NYSE:SQ) stock has been like a rocket. And, yes, the momentum hasn’t slowed down in the new year. So far, SQ stock is up a sizzling 30% to $45.29 (as of yesterday’s close).

It definitely helps that Wall Street analysts have been posting glowing commentary. Just look at Nomura Instinet’s Dan Dolev. In a recent note, he boasted that SQ was similar to where Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) were in the early days. According to Dolev, “In 10 years, Square is likely to be a very different company helped by accelerating share gains from payment peers and relentless disruption of services like payroll and HR.”

As for SQ stock, his price target for this year is $64. This would mean a potential gain of 42%. The consensus price target on SQ stock, on the other hand, is $41.29, which implies 9% downside!

Now, even if Dolev proves correct, this does not mean that the shares will not be volatile. Let’s face it, AMZN and GOOGL did face tough challenges in their nascent stages. Growth can be choppy and new products can fail to hit the mark. There are also the periodic bear plunges, as investors get skittish.

There is something else: Unlike AMZN and GOOGL, the competitive environment is particularly intense for SQ. Here’s what the company’s latest 10-Q filing notes: “We expect competition to intensify in the future as existing and new competitors introduce new services or enhance existing services. We compete against many companies to attract customers, and some of these companies have greater financial resources and substantially larger bases of customers than we do, which may provide them with significant competitive advantages.”

For the most part, SQ has been winning because it has developed better interfaces and has a simpler fee structure. But, hey, are such advantages really durable? After all, rivals like Intuit Inc. (NASDAQ:INTU) and Paypal Holdings Inc (NASDAQ:PYPL) are no slouches when it comes to developing apps.

Next, SQ has the risk of moving into too many categories, many of which have tough competitors. These areas include employee management, payroll, invoices, location management, marketing automation, appointments, customer loyalty programs and so on. In other words, SQ could easily be in danger of being too distracted.

Yet, perhaps the aggressive move into lending to small businesses could prove to be the most problematic. While this is a good fit with the customer base, the company will be taking on credit exposure. Keep in mind that, when the economy falters, small businesses tend to be hurt the most. True, SQ claims that it has sophisticated analytics. But, then again, they have not been tested with a recession.

Bottom Line on Square Stock

Square’s Jack Dorsey has definitely done a tremendous job with the company. He has an innate sense for understanding tech trends — and how to capitalize on them.

Yet, investors should still be cautious. SQ stock could be vulnerable right now, as the valuation is at nose-bleed levels. Note that the forward price-to-earning ratio is at 100. In other words, if there is slippage in the growth rate — which is a reasonable expectation — there could be a steep fall in the stock.

In fact, the recent activity should be ominous. From Nov. 22 to the end of the year, SQ stock dived from $48.80 to $34.70. So, yes, there is quite a bit of sensitivity to the shares. Hence, investors would be wise to wait for a better price.

Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.