Texas Pacific Land Corporation (TPL): A Bull Case Theory

Core Thesis - Texas Pacific Land Corporation (TPL) is viewed positively due to its straightforward and highly profitable business model, which involves leasing land for oil and gas operations and selling freshwater [2][3] Company Overview - TPL owns 880,000 acres of land in West Texas, generating approximately $700 million in annual revenue with only about 100 employees [2][3] - The company has impressive operating and net margins of 79% and 64%, respectively, showcasing its extraordinary profitability [3] Stock Performance - TPL's stock price was $853.74 as of December 1st, with trailing and forward P/E ratios of 41.24 and 37.74 [1] - The stock has experienced a nearly 50% decline over the past year after tripling in value in 2024, driven by rising oil prices and its inclusion in the S&P 500 [4] - At its peak, TPL's stock traded at a P/E of 66, but has since corrected to a premium valuation of 46x earnings due to a 20% decline in crude oil prices [4] Future Catalysts - Potential recovery catalysts include a rebound in oil and gas prices, which would increase drilling activity and royalty income [5] - TPL's land and freshwater access, along with proximity to cheap natural gas, position it well to benefit from the anticipated $200 billion investment in data centers by tech giants [5] Previous Analysis - A previous bullish thesis highlighted TPL's strategic acreage acquisitions and strong water royalties, but the stock has depreciated approximately 22.90% since then due to softer oil prices [6] - Despite the stock's decline, TPL's fundamentals remain resilient, with a focus on its exceptional profitability and potential in the data center market [6]