Few stocks better paint a picture of a pandemic hype stock and a crash back down to reality than Shopify (SHOP 1.61%). On March 1, 2020, a share of Shopify traded for about $46. A year and a half later, the stock topped out at nearly $170 a share. These days, it trades below its pre-pandemic level at around $30 per share. That's quite a roller-coaster ride for shareholders.

But very little of what happened to Shopify stock in the past matters now; it's all about what's ahead for this Canadian sales platform operator that offers ready-made solutions to companies needing e-commerce as well as retail point-of-sale systems. Investors seem to be divided on the potential for this company and its stock.

Let's dive into Shopify's bear and bull case and see if either side has a better argument.

The bear case for Shopify

One clear argument against Shopify's stock is that the company may have saturated its market. The necessary response to the pandemic ensured that far fewer companies now don't have an online presence, potentially limiting growth right now. This scarcity of clients means any new gains are likely from start-ups or from businesses transitioning from another platform. Future growth will likely have to focus more on expansion from existing customers.

To drive this, Shopify is spending heavily to offer additional products to its customer base. One key initiative is its fulfillment network buildout. The company is developing a warehouse network that can guarantee two-day delivery for customers. Because its original distribution system wasn't great, Shopify purchased Deliverr for $2.1 billion to improve its logistics capabilities.

While this acquisition may seem logical, Shopify invested a lot to make it happen. Doing so extends the timeline of its plans for profitability.

Shopify did post some impressive earnings during 2020 and 2021, but those times have passed. For example, Shopify lost $190 million in operating income in the second quarter versus profits of $139 million in 2021, despite revenue growing 16% year over year in Q2 2022. To remedy this, Shopify laid off about 10% of its company in July. That probably didn't have a positive effect on the morale of the remaining staff.

It's pretty easy to lay out a grim picture of Shopify, but it revolves around one central theme: What it's doing now won't work. If that turns out to be false, then the bulls may have a better argument.

The bull case for Shopify

The bear case for Shopify argues that it has saturated its market. But if Shopify's fulfillment network works out, it could provide a massive growth catalyst. Many retailers struggle to deliver packages rapidly and cannot compete against Amazon's two-day shipping. Shopify's fulfillment network could be the alternative any retailer not named Amazon needs to stay competitive. 

As for overspending, Shopify's new warehouse management system is up and running now, increasing the number of orders with two-day delivery access from 2% to over 70%. More investment will be needed, but it is already starting to pay off.

The e-commerce solutions provider is also giving its sellers the tools necessary to sell across borders. With Shopify Markets, currency exchange and any other logistics necessary to sell across borders are handled by Shopify, making it a no-brainer for businesses looking to expand their reach.

Another key growth area for the company is its in-house payment processing solution. In Q2, its gross payment volume penetration rose to 53% from 48% in 2021, showing that Shopify's internal payment processing solution is further resonating with its customers.

While these are all positive developments, Shopify's financials aren't likely to improve soon. Operating losses are projected to deepen in the second half of 2022, although at a slower pace. While revenue growth will begin to ramp up again, it still won't be enough to produce a profit. However, analysts project Shopify to deliver about 23.3% revenue growth in 2024, so they believe Shopify still has a large opportunity.

Which investment case holds sway?

If you're looking for a quick turnaround story, Shopify isn't your stock. However, I believe the company is still on track. It may have stumbled by overinvesting in its 2021 gains, but the long-term trend toward e-commerce is still prevailing. With the stock trading at 7.3 times sales, it's tied for the lowest valuation it has ever experienced.

It will take a while for Shopify to regain its highs, but I think there isn't a lot of downside left in the stock, and investors shouldn't be afraid to invest in it.