Shopify (SHOP -0.18%) stock has taken investors on a tumultuous ride over the last couple of years. The e-commerce services specialist has continued to play a key role in helping businesses launch and scale online retail operations, but its shares have suffered big sell-offs as growth has slowed and bearish pressures have reshaped the broader market.

Shopify stock has lost roughly three-quarters of its value so far in 2022 and is down 80% from the all-time high that it hit last November. Should investors treat the big valuation pullback as a buying opportunity, or is there still too much downside risk to make the stock a smart buy at current prices?

Read on to see why two Motley Fool contributors have different takes on the outlook for Shopify stock. 

$100 bill in a miniature shopping cart.

Image source: Getty Images.

Bull case: Shopify is well positioned for the long term

Keith Noonan: Despite a challenging macroeconomic backdrop, Shopify managed to beat revenue expectations in the third quarter, with sales of $1.4 billion topping the average analyst's estimate for revenue of $1.34 billion. A revenue increase of 22% year over year was still a far cry from the 46% annual sales growth posted in last year's Q3, but the performance looks solid given the difficult comparison.

Between its core subscription and merchant services offerings, Shopify has a sticky revenue base and the opportunity to grow with customers as they scale their businesses. While the e-commerce services provider does feel negative impacts when its merchant partners' online stores fail or underperform, its services are best in class and have high switching costs. Macroeconomic slowdown could lead to weaker growth in the near term, but the overall e-commerce industry still looks poised for strong expansion over the long term, and the company appears to be intelligently balancing its approach to cost management and growth initiatives.

Shopify's push into fulfillment services will continue to be a drag on margins, but it should help the business improve its overall competitive positioning. With resource-rich competitors including Amazon and Alphabet potentially aiming to move in on Shopify's turf, the smaller e-commerce player is taking a smart approach to growth that involves both cost-cutting in response to current headwinds and laying the foundation for lasting leadership in its industry.

Shopify still has a highly forward-looking valuation, and that opens the door for more turbulent trading if bearish pressures continue to shape the broader market, but the business and industry opportunity still look strong enough to deliver big wins for patient investors. 

Bear case: There are better alternatives right now

Jennifer Saibil: There's no question that Shopify demonstrated robust growth in the third quarter, and that it has strong future potential. The concerns with Shopify stock boil down to ongoing massive losses and a valuation that doesn't look very attractive.

Shopify was barely profitable prior to the pandemic. When demand exploded, sales finally began to cover costs in a meaningful way. But management made huge investments in the platform to meet demand, and as demand moderates, profitability has plummeted.

SHOP Net Income (Quarterly) Chart

SHOP Net Income (Quarterly) data by YCharts

Even as analysts expect a 16% increase in revenue in the fourth quarter, the company forecasts an adjusted operating loss similar to Q3, which was $45 million. Adjusted operating income in the 2021 fourth quarter was $130 million.

Shopify closed out its acquisition of fulfillment network Deliverr in July for $2.1 billion, and it's still integrating the technology into its platform, as well as dealing with the expenses. Net loss in the third quarter was $158 million.

As far as valuation, even though Shopify stock is down 75% this year, it's still not cheap. Shares trade at 8.4 times trailing-12-month sales, which is significantly higher than other e-commerce companies such as Amazon, Etsy, and MercadoLibre.

Shopify has a dominant position in its industry, but as its losses mount and its shares continue to look expensive, investors might want to leave it on their watch lists and opt for something better. 

Should you buy Shopify stock now?

Despite big pullbacks in the company's share price, Shopify remains a relatively high-risk stock given today's volatile market conditions. The company's slowing revenue expansion, lack of profits, and growth-dependent valuation may make the stock a poor portfolio fit for most risk-averse investors.

On the other hand, Shopify still has a leadership position in its corner of the e-commerce services industry, and the company's executive team seems to be making smart cost-management moves while also shoring up long-term competitive strength. While the company's growth-dependent valuation comes with downside risk, this year's sell-offs have brought the stock down to much more reasonable levels, and it could wind up delivering strong returns for risk-tolerant investors who buy at today's prices.