As markets have tumbled over the past two months, hyper-growth tech stocks like Square (NYSE:SQ) have entirely lost their favor on Wall Street. At the beginning of October, Square stock was running to all time $100 highs and most everyone thought it was only a matter of time before the stock took out $110, then $120, then $130, so on and so forth.

Fast forward two months. That hasn’t happened. Instead, SQ stock has dropped nearly 40% to levels just above $60. Now, most everyone is thinking that it is only a matter of time before this stock takes out $60, then $50, then $40, so on and so forth.

That won’t happen either. Granted, the near term outlook on Square isn’t all that great because of rising rates, slowing growth, and ramping competition. These near term risks will limit upside over the next several months.

But, the long term outlook on Square remains robust because of the company’s leadership position in facilitating non-cash payments, a position which ultimately will command a much larger valuation in the long run.

As such, Square stock is a great example of near term pain and long term gain. For investors with multi-year time horizons, “near term pain, long term gain” stocks like Square are great pick-ups during this recent tech sell off.

Near Term Risks Limit Immediate Upside

Square stock hasn’t dropped 40% over the past two months without reason. Instead, a slowing of the U.S. economy at the hands of rising rates and amid rising competition has created a dour near term outlook for Square.

At its core, Square is a domestic payments processor with a ton exposure to the U.S. consumer. The healthier the U.S. consumer is, the more they buy, and the more they buy, the more they use Square’s payment processors and apps. As such, as goes the U.S. consumer, so goes Square.

But, the while the U.S. consumer is still as healthy as they’ve been in the past decade, there are cracks starting to form in this newfound optimism. Interest rates are heading higher, and as they have moved higher, rate sensitive parts of the U.S. economy like autos and housing have struggled significantly.

Also, tariffs are starting to have a real financial impact on American companies, and many U.S. corporations are managing down future growth outlooks as these global economic risks rise.

Overall, while the U.S. consumer is healthy today, they may not be so healthy tomorrow. If the consumer isn’t healthy tomorrow, then Square’s robust 50%-plus revenue growth rates will come down significantly. If those growth rates come down significantly, then Square stock’s valuation (137X forward earnings) seems a bit overstated.

Moreover, as a richly valued growth stock which derives most of its value from future profits, higher rates create a drag on the valuation by decreasing the present value of those future profits. Also, Square’s fast-growing lending business could be subject to big risks if rates keep going up and economic growth keeps slowing.

All together, the near term outlook for Square stock isn’t great. If rates keep going up and economic growth keeps slowing, Square’s growth profile will deteriorate, and Square stock will continue to fall due to a valuation that prices in big growth for a lot longer.

Secular Tailwinds Provide Long Term Firepower

For multi-year investors, near term pain in Square is nothing more than a long term opportunity.

Square is a third-party enabler of digital and non-cash transactions. As an enabler of such transactions, Square is a pure play on the trend that cash is becoming a thing of the past. Today, more commerce transactions are being completed with a credit card, debit card, digital payment account or some other form of non-cash payment than ever before, and this trend is only increasing.

Square is the leader in enabling these types of payments. Yet, Square presently captures just 0.2% of the $40 trillion and growing global consumer spend market.

As such, so long as the non-cash payment transition persists and Square maintains leadership positioning, this company will continue to grow by leaps and bounds as its market share goes from 0.2% to 0.4%, 0.6%, 0.8%, so on and so forth.

Market share gains seem very likely at this point in time. In the digital payments world, there are benefits to having retailers of all shapes and sizes use the same digital payment processor. Consistency across retailers creates a smoother and more streamlined checkout experience for consumers. It also creates a smoother and more streamlined learning curve for retail employees switching between retailers.

Square has created an ecosystem surrounding its digital payment processors, and this ecosystem includes things like Square Capital and Square Cash, two things which further augment the benefits of payment processor consistency.

Overall, it is likely that the non-cash payment transition continues to accelerate while Square maintains its leadership position. As such, this company, and this stock, have enormous growth potential over the next several years.

Bottom Line on Square Stock

So long as markets remain concerned about higher rates and slowing growth, valuation will be a drag on this stock. But, those concerns won’t last forever, and once they clear, Square stock will head significantly higher due to powerful long term growth drivers.

As of this writing, Luke Lango was long SQ.