Shopify (TSX: SHOP) stock is set to release third-quarter earnings today, and the momentum looks seasonally bearish. The first and third quarters are seasonally weak for Shopify. Thus, the 12% correction in the last 15 days comes as no surprise. In fact, this is an opportunity to buy the stock ahead of the holiday season rally.
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Is e-commerce a good investment?
Shopify stock is highly volatile, with a 40%–50% rally and dip being a normal course of trading. The stock surged 40% between September 15 and October 15, in the run-up to the holiday season before a correction. As we enter the holiday season, the stock could see earnings spurt, and this time artificial intelligence (AI) contribution to sales could drive the rally.
Alphabet’s recent earnings showed how its AI Overview on the search engine was affecting its traditional ad revenue. The market is keeping a close watch on AI return on investment (ROI). If Shopify can show a reverse trend to what Alphabet showed, its stock price could grow significantly. Even if it doesn’t, the stock will likely rally 30–40% in the holiday season.
How much Shopify stock do you own?
Although volatile, Shopify is a resilient growth stock that fits multiple investing styles. You can buy the stock directly on the TSX or Nasdaq. Suppose Jemma bought 100 shares of Shopify at $150 per share in May 2026 on the TSX. Is her portfolio exposure to Shopify only limited to 100 shares or $15,000?
Not exactly.
Shopify has 1.2 billion shares trading on the stock exchange, of which 73.8% are owned by institutions. These institutions include mutual funds, ETFs, and wealth managers who hold positions in certain stocks. Jemma buys Shopify stock, but also invests $500 every month in the iShares Canadian Growth Index ETF (TSX: XCG). This ETF has 11.3% holdings in Shopify. So, if she has invested $10,000 in the XCG ETF, she has another $1,130 exposure to Shopify stocks.
The ETF diversifies your exposure to other stocks. You do not pay $150 per share to buy Shopify stock. In an ETF, you pay the net asset value (NAV) per unit, which is calculated as the weighted average value of the portfolio.
The technology ETF with high exposure to Shopify
Since XCG has a higher weightage of 11.3%, Shopify’s stock price volatility influences its NAV. The iShares S&P/TSX Capped Information Technology Index ETF (TSX: XIT) has a 26.3% exposure to Shopify and 30% exposure to Constellation Software. The price momentum in these two stocks significantly influences XIT ETF returns.
If we compare the one-, three-, and five-year returns of Shopify stock, the XCG ETF, and the XIT ETF, you will see how the ETFs normalize the volatility. A $10,000 investment in each on November 2, 2021, 2023, and 2025 creates a hypothetical return as follows.
| Stock/ETF | 1-Year Return | 3-Year Return | 5-Year Return |
| XCG ETF | $10,073 | $16,390 | $14,558 |
| XIT ETF | $9,357 | $19,694 | $14,313 |
| Shopify Stock | $11,317 | $25,899 | $8,923 |
| Total | $30,748 | $61,983 | $37,794 |
In 2021, Shopify stock fell after the tech bubble burst, losing 80% of its value as exponential growth slowed. At that time, it entered into the logistics business, looking to provide end-to-end service to merchants and shoppers. However, logistics is a capital-heavy business and Shopify’s is a capital-light model. Too much expansion too fast on pandemic-induced demand backfired when the Bank of Canada went on a spree of interest rate hikes to control growth and inflation.
Thus, you will see ETFs have normalized the five-year returns from the bubble. Those who bought Shopify stock while worth $10,000 in November 2021 are still in the red at $8,923.
Investor takeaway
An individual stock brings with it concentration risk. For seasonal stocks like Shopify, a good strategy would be to buy individual stocks in the March to August period when seasonal demand is low. Consider selling part or full shares in the November or February rally when the stock price surges 40–50%. Then use that money to buy more Shopify shares in March to August. This could be your satellite portfolio.
In the core portfolio, consider investing $10,000 in the XIT ETF for the long term. It diversifies your risk but at the same time gives you high exposure to Shopify.
