What happened

Shares of Peloton Interactive (NASDAQ:PTON) jumped 10% in morning trading Monday after Goldman Sachs (NYSE:GS) aggressively increased its price target to $84 per share from its previous target of $64. Peloton closed out last week at $58.53 per share.

So what

The COVID-19 pandemic has caused an outsize increase in demand for personal at-home fitness gear and classes, and Goldman believes Peloton will benefit from the "sustained" nature of the growth. Even with above-average delivery times, consumers are still buying.

Man running on a treadmill

Image source: Peloton Interactive.

Despite Peloton investing in expanding stationary bicycle capacity and resuming connected treadmill deliveries on a limited basis, because they are a high-touch installation, Goldman doesn't think the connected-fitness leader is simply pulling sales forward.

Now what

Goldman Sachs analyst Heath Terry says Peloton has a relatively low penetration rate in the fitness market, so there aren't necessarily many sales to pull forward. Rather, it is increasing its addressable market, meaning new customers are discovering the company.

Terry told investors in a note that Peloton's connected fitness subscribers will exceed Wall Street's consensus estimates and the company's own guidance. Management forecasts it will end fiscal 2020 with between 1.04 million and 1.05 million connected subscribers, which at its midpoint is an increase of 104% compared to last year.

Peloton has marketed fitness classes that don't require a user to buy one of its pricey pieces of equipment, and it intends to introduce a lower-cost treadmill soon because of the growth potential of the market.

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