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

We came across a bullish thesis on Texas Pacific Land Corporation on Rebound Capital’s Substack. In this article, we will summarize the bulls’ thesis on TPL. Texas Pacific Land Corporation's share was trading at $853.74 as of December 1st. TPL’s trailing and forward P/E were 41.24 and 37.74 respectively according to Yahoo Finance.

Texas Pacific Land (TPL) operates one of the most straightforward yet highly profitable business models among multi-billion-dollar corporations. The company owns 880,000 acres of land in West Texas, which it subleases to oil and gas operators in exchange for royalties, while also selling freshwater extracted from its land—totaling $150 million in sales last year.

With only about 100 employees, TPL generates roughly $700 million in annual revenue and maintains extraordinary profitability, with operating and net margins of 79% and 64%, respectively. This asset-light, perpetual-tollbooth structure has enabled the company to deliver a remarkable 100x return over the past 15 years, outperforming even tech giants like Apple.

However, TPL’s stock has fallen nearly 50% over the past year following an exceptional run in 2024, when it tripled in value amid surging oil prices and its inclusion in the S&P 500. At its peak, the stock traded at a P/E of 66, but a subsequent 20% decline in crude oil prices and normalization of sentiment led to a correction, bringing valuation down to a still-premium 46x earnings. Given TPL’s dependence on energy cycles, its short-term growth remains tied to commodity volatility.

Looking ahead, potential catalysts for recovery include a rebound in oil and gas prices, which would drive renewed drilling activity and royalty income. Additionally, the company’s vast land, freshwater access, and proximity to cheap natural gas position it as a potential beneficiary of the expanding AI and cloud infrastructure buildout, with tech giants expected to invest over $200 billion in data centers.

Previously we covered a bullish thesis on Texas Pacific Land Corporation (TPL) by Six Bravo in December 2024, which highlighted the company’s strategic acreage acquisitions, strong water royalties, and S&P 500 inclusion as growth catalysts. The company’s stock price has depreciated approximately by 22.90% since our coverage. This is because the thesis didn’t fully play out amid softer oil prices. The thesis still stands as TPL’s fundamentals remain resilient. Rebound Capital shares a similar view but emphasizes its exceptional profitability and data center potential.

Texas Pacific Land Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held TPL at the end of the second quarter which was 31 in the previous quarter. While we acknowledge the potential of TPL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.