Digital freight-matching companies, or DFMs, such as Uber Freight have entered asset-light truck brokerage over the past few years. It’s early in their evolution, but most DFMs hope to reinvent the truckload shipping process via highly automated marketplaces that can match shippers and truckers on demand. At times, this has caused investor trepidation over the potential threat to traditional providers, and that is likely to recur, creating buying opportunities for the informed.
We don’t believe the proliferation of DFMs spells disaster for moatworthy brokers. The network effect can mount a powerful defense, pure app-based companies’ service capabilities appear limited, and the large providers aren’t standing still. DFMs are starting out with digitized platforms, but we think they’re essentially low-cost truck brokers, and it remains to be seen to what degree their head-count-light model will gain traction.
Matthew Young, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.