Texas Pacific Land stock: stalled rally sets stage for bullish breakout

Texas Pacific Land stock price has soared this year, making it the second-best-performing company in the S&P 500 Index.

It has jumped by 85% this year and 100% from its lowest point in December, bringing its market capitalisation to over $36.5 billion.

Texas Pacific Land's business is doing well 

TPL is a top land holding company that owns over 880,000 acres of land in the Permian Basin, where it makes money by charging clients royalties, leasing land, and selling water. It is now expanding its business into other data centres and other renewable projects.

Texas Pacific Land counts the biggest energy companies as clients.

These include companies like Chevron, ExxonMobil, ConocoPhillips, Pioneer Natural Resources, and firms like Diamondback and EOG Resources.

Its business model makes it one of the most profitable companies in the United States in terms of margins.

The most recent results show that the company made over $203 million in revenue, up by 17% YoY. 

Most of its revenue, $108 million, came from the oil and gas royalties, followed by the sale of water, produced water royalties, easements, and land sales.

These segments made $44 million, $32 million, $32 million, and $16 million, respectively.

Texas Pacific Land has one of the highest margins in the industry.

After making $203 million in revenue, it made a net income of $121 million, giving it a profit margin of 59%, higher than NVIDIA’s 53%.

TPL’s revenue in the first nine months of the year jumped to $586 million from $520 million in the same period a year earlier. Its profit jumped to $358 million. 

In addition to having high margins, the company has one of the best balance sheets in the S&P 500 Index. It has just $156 million in total liabilities against $1.52 billion in total assets. It ended that quarter with over $531 million in cash and $127 million in accounts receivable.

Texas Pacific Land is now expanding its business to the booming data centre industry.

It announced a partnership with Bolt Data & Energy to develop and enable large-scale data centre campuses in West Texas. Bolt was started by Eric Schmidt, the former Google CEO.

Texas Pacific Land stock price technical analysis 

TPL stock chart | Source: TradingView 

The three-day chart shows that the TPL stock price has rebounded from a low of $270 in December to the current $530.

It has moved above all moving averages and the crucial resistance level at $490, its highest point on March 3.

TPL stock has remained above the 50-day and 200-day Exponential Moving Averages (EMA), a sign that bulls remain in control.

It has also formed a bullish flag pattern, which is made up of a vertical line and a horizontal channel. It also formed a cup-and-handle pattern.

Therefore, the most likely scenario is where the stock continues rising, with the next key target being at $583, up by 10% above the current level.