On Thursday, Goldman Sachs (NYSE:GS) resumed coverage on LandBridge shares (NYSE:LB), assigning a Buy rating and setting a price target of $71.00.
The firm's analyst highlighted LandBridge's strategic position as a pioneering company in the surface acreage management sector within the Permian Basin, which caters to various businesses in the energy and industrial sectors.
The analyst's optimism about LandBridge is based on several factors, including its prime acreage that is expected to continue benefiting from robust activity in the Permian Basin, a business model that requires minimal operational or capital expenditures, and significant potential for revenue growth, particularly from data centers in the near future.
LandBridge's recent acquisition of 46,000 acres in Reeves County, Texas, completed on December 20, 2024, for $245 million, is also a key driver of Goldman Sachs' positive outlook. This acquisition, which guarantees $25 million in annual revenue, was accompanied by a private placement of $350 million in equity, with $150 million effectively functioning as a secondary sale.
"This deal, solid 3Q24 performance, and an improving line of sight on upside opportunities drive our EBITDA and FCF estimates 20-25% higher for 2025-28," the analysts said.
The $71 price target set by Goldman Sachs is based on a 30 times multiple applied to the firm's 2026 EBITDA estimate for LandBridge. This valuation multiple stands in contrast to LandBridge's closest peer, Texas Pacific (TPL), which trades at approximately 44 times its annualized year-to-date EBITDA as reported by the company.
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