Shopify (SHOP 2.74%) investors are having a brutal 2022. The e-commerce platform's stock is down roughly 80% since the start of the year and has fallen even farther from its all-time high, which came in late 2021. Much of that decline can be attributed to the wider market slump that has driven the tech-heavy Nasdaq Composite index lower by 33% this year.

But Shopify has also given investors specific reasons to be disappointed in its execution as the world emerged from the pandemic. Let's take a closer look at why the stock has fallen so hard in 2022.

The growth hangover

Shopify has endured more than a year of quickly decelerating growth rates. In that way, it joins many other formerly high-flying stocks that were early winners as the pandemic pushed more spending into online channels.

Through late 2021, Wall Street was predicting that these boom times would never end and that a permanently elevated level of e-commerce activity would sustain Shopify's high valuation.

Instead, consumers dramatically shifted their spending back toward in-person shopping once the pandemic threat faded. This demand shift was amplified by supply chain challenges and inflation, which combined to shrink merchandise volumes on Shopify's platform.

As a result, year-over-year growth trends have slowed from nearly 100% in early 2021 to 15% in the most recent quarter. It's no surprise that such a deceleration would pressure the stock, especially since there's no clarity yet about the timing of any rebound.

Bad timing

The demand shift caught management by surprise, occurring just after the company had spun up its spending on the platform infrastructure. Shopify was then left overextended and poorly positioned for the current level of sales growth. "We overshot our prediction," executives said in July.

SHOP Operating Margin (TTM) Chart

SHOP Operating Margin (TTM) data by YCharts.

Shopify is recalibrating its investment spending now to reflect the new, slower level of growth that management expects over the next several quarters. But it will take time for profitability to begin climbing back up toward the levels that investors typically associate with a formidable tech stock. The company still faces a potentially extended period of bumpy results. Add in a slowing industry and possible recession on the way, and you've got a compelling bearish case for the stock.

But losses aren't quite as bad as they might seem at a glance, however. And Shopify's growth rates will inevitably start to look better now that it is going up against weaker results from a year earlier. Shopify is now valued at pre-pandemic levels despite its much larger sales footprint. That pessimistic valuation probably reflects the unlikely prospect that its best days are forever behind the business.

Patient investors who can look past the short-term challenges have the opportunity to pick up a leading e-commerce service provider for a fraction of what they would have paid just a few months ago. In exchange, you'll have to take on the risks associated with a cloudy growth outlook over the next few quarters. More negative surprises might be on the way around earnings, too, as Shopify restructures its business.

That's why many investors might prefer to watch the company's next few earnings updates for concrete signs of stabilizing profits before making a big commitment to the stock.