Texas Pacific Land Up 127% in 2024: Can It Deliver in 2025?

Texas Pacific Land Corporation TPL has been a standout performer in 2024, not only as the best Oil/Energy stock in the S&P 500 but also as the 7th best overall. With a staggering 127.3% year-to-date gain, it has outperformed even high-flying names like Netflix NFLX and Tesla TSLA. Netflix has gained some 90%, while Zacks Rank #2 (Buy) Tesla has provided an 83% return this year.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.TPL, NFLX, TSLA Year-to-Date Stock Performance Image Source: Zacks Investment ResearchInvestors now wonder whether TPL’s meteoric rise can be replicated in 2025 or if the stock has reached its peak.Company ProfileTexas Pacific Land is a unique player in the energy sector, owning around 900,000 acres in the Permian Basin, one of the most prolific oil-producing regions in the world. Unlike traditional exploration companies, TPL operates an asset-light model, generating income through oil and gas royalties, water sales and surface leases. This diversified revenue mix, along with its debt-free balance sheet, has cemented TPL’s position as a resilient and profitable energy business.Record Production Fuels GrowthTPL achieved a record in the third quarter of 2024, with oil and gas royalty production reaching 28,300 barrels of oil equivalent per day, a 13% sequential increase. This growth was driven by robust activity in the Midland Basin and Northern Delaware regions, where operators like ExxonMobil XOM and Occidental Petroleum OXY are active. This high-margin revenue stream from oil and gas royalties, which account for more than half of TPL's income, remains a cornerstone of its financial strength, even in a volatile commodity market.  Image Source: Texas Pacific Land CorporationExpanding Water BusinessTPL’s water-related operations are another growth driver, with produced water royalties increasing 46% year over year in the third quarter. This segment, which is expected to generate $100 million in revenues in 2024, benefits from strategic agreements that require minimal capital expenditure. Additionally, TPL’s ability to monetize treated water sales alongside royalties positions it well to address growing water demands in the Permian Basin. These dual-income streams enhance operational efficiency and support long-term revenue stability.Strategic Acquisitions Enhance Growth PotentialTPL invested $500 million in acquisitions in 2024, adding 50,000 acres of surface rights and expanding its royalty acreage in the Permian Basin. These deals are expected to contribute an additional 30,000 barrels of oil equivalent per day, boosting current production by 10%. With favorable pricing structures delivering double-digit cash flow yields at $70 oil, these acquisitions strengthen TPL’s revenue base and extend its growth runway.Challenges AheadDespite its successes, TPL faces headwinds that may temper its growth trajectory. Declining realized commodity prices — oil prices fell 8% and natural gas prices dropped 65% year over year in the third quarter of 2024 — pose a risk to royalty revenues. Additionally, while TPL has explored non-energy revenue streams like data centers and renewable energy, these initiatives remain in early development and contribute little to current earnings. The company’s high valuation, with a forward price/earnings ratio of 52.50, also raises concerns. Such a premium is difficult to sustain without extraordinary growth, exposing the stock to potential corrections if expectations are not met.  Image Source: Zacks Investment ResearchConclusionTexas Pacific Land’s stellar performance in 2024 reflects its strong fundamentals, strategic acquisitions and robust operational execution. While the stock remains a compelling investment due to its unique business model and diversified revenue streams, replicating 2024’s 126% gains in 2025 may be challenging. Investors can consider buying TPL stock, but whether it can deliver similar returns next year will depend on its ability to navigate valuation pressures, commodity price volatility and the execution of its growth initiatives.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Exxon Mobil Corporation (XOM): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report Occidental Petroleum Corporation (OXY): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Texas Pacific Land Corporation (TPL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks