No company ever experiences a straight line to the top. This statement is particularly true for technology names, and PayPal Holdings Inc (NASDAQ:PYPL) is finding this out the hard way. The day before its first quarter 2018 earnings report, PYPL stock slipped more than 4%. It’s hardly the type of performance you want to see going into the earnings.

Two weeks ago, I warned readers that PayPal stock was due for a correction, or at least a corrective phase. We’ve all heard the phrase “the bullishness is priced in.” It’s a concept that applies to every investment class, but tech firms are notoriously vulnerable. Since these names generate sexy headlines, they receive enormous sentiment waves.

Obviously, that’s great if you’re catching them at the right time. Unfortunately, being caught on the wrong end can lead to significant damage.

Now, what does the sharp loss heading into earnings mean? On paper, probably not much. Since branching off eBay Inc (NASDAQ:EBAY), PYPL has either met or exceeded earnings per share expectations. I don’t expect anything different in Q1. The performance history doesn’t justify being contrarian.

Additionally, I’m long-term bullish on PYPL stock. Given the currently shaky markets, you want to shift your portfolio towards companies that have a viable future. I can only think of few organizations that rival PayPal.

If cryptocurrencies and the craze surrounding them have proven anything, it’s that more people are ready for payment and financial alternatives. For PYPL, you have to love the broader sentiment towards alternative payment systems.

So to me, it’s not about whether PayPal stock hits or misses. Instead, can Q1 produce an impressive enough result?

PYPL Must Convince markets for Q1 Report

Unsurprisingly, this figure is on the higher end of the estimate spectrum, which ranges from 49 cents to 57 cents. Against the prior-year quarter, consensus is nearly 23% higher than Q1 2017 actuals.

Although it’s a small sample, historically speaking, PayPal delivers strong results in Q1. Starting off fiscal 2015, the digital-payments processor met EPS expectations. To head off 2016 and 2017, PYPL delivered an earnings beat. The average earnings surprise for these two years was 6.5%.

For the revenue side of the picture, Wall Street is equally optimistic. Analysts have their consensus target zoned in at $3.6 billion. The estimate range is between $3.4 billion to $3.7 billion. In the year-ago quarter, PayPal registered just under $3 billion in sales. Should the company deliver again, we’re talking about a 21% year-over-year increase.

As I mentioned previously, I wouldn’t be surprised if PayPal stock hits on all counts. The question really comes down to justifying its valuation.

Between fiscal years 2015 through 2017, EPS has jumped 47%. We see similar growth in top-line sales, or nearly 42%. However, since closing at $36.71 on July 6, 2015, PYPL stock has more than doubled.

I get it: we see several tech names fly on less-than-ideal to downright poor financials. The issue here, though, is that we’ve yet to see how PYPL responds when others know its playbook. In other words, PayPal is no longer a fresh commodity. The honeymoon phase is over.

To reassert itself after a frustrating consolidation phase in the markets, management must offer confident guidance. Meeting or slightly exceeding expectations is no longer going to cut it. Investors need something more.

How to Play PayPal Stock

If you’re long PayPal stock, and if the markets respond positively to Q1, I would hold the position. However, I wouldn’t go too crazy in adding to it. Sentiment towards the broader indices is unconvincing, and so I’m adopting a cautious tone.

That said, if PYPL stock takes a hit, I would consider buying shares from a longer-term strategy. I’d especially be bullish if shares fall despite the company hitting its targets. That would indicate a move based purely on psychology and not on the fundamentals.

As I reiterated consistently this year, I’m bullish on PayPal stock for the long haul. This company is the Amazon.com, Inc. (NASDAQ:AMZN) of the rising digital payments movement. It just happens to be stuck in a temporary lull. Just be mindful of this, and use any potential dips to your advantage.

As of this writing, Josh Enomoto is long bitcoin.