A year ago, Square’s (NYSE:SQ) equity lift signaled an overheated market. SQ stock touched $100 at the end of September, a valuation that seemed close to unsupportable. That turned out to be the peak for the tech firm. The broad market turned and SQ lost half its value in less than three months.

For the first two months of this year, Square stock followed the market back up, bouncing some 50%. But investors have soured. Since March 1, SQ stock has dropped about 20%, and it’s somewhat of an odd decline. Other payment plays are doing well. Shopify (NYSE:SHOP), perhaps the most direct peer, has doubled so far this year, leading to widespread concern about its valuation.

Yet SQ stock has been left out of this rally. Plus its valuation, while still high, has declined. For the first time in a while, SQ looks potentially intriguing. It’s not quite cheap enough yet, but that could change in the coming months.

Why Has SQ Stock Come Down?

The easy answer for why SQ has struggled over the last three months is that earnings have “disappointed.” More specifically, guidance has disappointed. Square beat earnings expectations in the third quarter but investors didn’t like the Q4 guidance. The pattern repeated with Q4 actuals in late February, with SQ stock falling after that report too. Once again, following the Q1 release, investor concerns about the outlook for Q2 sent shares tumbling.

Of course, the fact that the same pattern has repeated three straight times seems a bit strange. At a certain point, investors would seem to realize that Square is guiding conservatively. In each of the last three quarters, Square easily outpaced initial guidance.

For instance, ahead of Q1, Square projected adjusted revenue of $472 million to $482 million; the actual figure was $489 million. Adjusted earnings per share of 11 cents handily beat forecast, which ranged from 6 cents to 8 cents.

If guidance again is conservative, then Square’s Q2 numbers should come in right about where analysts projected ahead of the quarter. And it’s worth noting that full-year guidance was pretty much in line with those expectations.

Earnings haven’t been spectacular relative to expectations, but they’ve been good enough. And expectations aside, performance has been close to spectacular. Adjusted revenue increased 59% year-over-year in Q1, and 49% excluding help from recent acquisitions. Adjusted EBITDA increased 62%. Square is growing like gangbusters, yet investors don’t seem all that impressed.

Peers Are Doing Fine

That said, it does seem like earnings are the culprit because investor attitudes toward similar stocks still seem positive. Shopify shares have nearly doubled YTD. While SQ stock has lost 20% since March 1, other payment plays have rallied.

SHOP is up a whopping 44%. PayPal Holdings (NASDAQ:PYPL) has gained 11%. Mastercard (NYSE:MA) and Visa (NYSE:V) are up 11% and 8%, respectively. Tech stocks on the whole, as measured by the tech-heavy NASDAQ Composite, are about flat.

Here too, the declines seem a bit strange. It’s not as if optimism toward Square’s opportunity has changed all that much. In fact, looking at similar securities, that optimism has risen. Yet Square stock continues to fade and is currently threatening a four-month low.

The Case for and Against Square Stock

There’s one big issue, however. The declines in SQ of late seem strange, but they’re also coming off levels that looked far too high to begin with. And even with the pullback, Square stock isn’t cheap, or close. Shares still trade at about 10x adjusted revenue, even backing out cash. On the same basis, forward price-earnings ratio is in the 55x range.

And there are some modest concerns beneath the headline numbers. Growth in smaller accounts has decelerated to the range of about 17% in Q1. That puts pressure on Square’s ability to grow with larger accounts. To attract those customers, Square may have to give better pricing, and spend more money. As I’ve pointed out relative to SHOP, cyclical weakness could hit small business — still about half of revenue — and lead to a quick slowdown in growth.

There are still concerns here, but there’s still an intriguing story, and a lower valuation. I’ve compared Square to Amazon.com (NASDAQ:AMZN) in the past, given its potential to expand beyond its initial business. And Square is delivering on its promise, at least in the early stages.

Whether the price is cheap enough is in the eye of the beholder. From here, 55x forward earnings, given the risks, isn’t quite cheap enough. And it seems likely — particularly if broad market fears accelerate — that SQ stock will continue to fade. But the story here is attractive, and the valuation more reasonable. It’s not entirely clear why that valuation has come in. But if it continues to do, SQ could indeed become too cheap to ignore.

As of this writing, Vince Martin has no positions in any securities mentioned.