When the coronavirus pandemic led state and local governments to issue stay-at-home mandates earlier this year, gyms and other workout facilities were among those that had to shut their doors. But even though the businesses were classified as nonessential, the services they provide weren't. Peloton Interactive (NASDAQ:PTON) was fortunate enough to be in a position to serve those millions of individuals who no longer had a gym they could frequent.

Let's take a look at why the maker of connected fitness products is poised to experience increasing sales both during and after the pandemic. 

A woman exercising on an exercise bike.

Peloton is growing revenue fast. Image source: Getty images.

Helping us get in shape

The closing of gyms across the U.S. led to a surge in orders for Peloton's exercise bikes, treadmills, and related services. In the company's third quarter, revenue grew 66%. With gyms still closed in many areas and people still hesitant to leave their homes, that trend is likely to continue.

Further, as of March 31, the company had over 886,000 connected fitness subscribers, who pay the company a monthly fee to participate in virtual exercise classes. Given the company's high retention rate (93%) and the surge in recent orders as a result of COVID-19, it's likely the company added to these totals significantly.

Moreover, it appears more likely that coronavirus cases will not drop to zero anytime soon. Tragically, individuals who are overweight are at a higher risk of severe outcomes from COVID-19, and more than 107 million Americans are considered obese. Additionally, for an obese person, a coronavirus vaccine may be less effective. As this becomes public knowledge, it might increase the number of people who engage in an exercise routine, and some of them may go to Peloton for its products and services.

Even when the pandemic has run its course or there are effective vaccines and treatments, Peloton is likely to continue growing. Government mandates forcing businesses to close their doors to the public are causing some of those gyms to go bankrupt. One of California's largest, 24 Hour Fitness, filed for bankruptcy and announced it would be closing 100 (25%) of its locations permanently. That's going to leave millions of people without a place to exercise. Peloton, with its connected fitness products and live exercise classes, can step in to fill that void.

In addition to gaining market share, Peloton can grow revenue because the industry is growing. According to the International Health, Racquet, and Sportsclub Association, the health club market is worth $97 billion globally and has grown every year since 2008. Increasing demand with declining supply is a great place to be for a company like Peloton.

What this means for investors

Admittedly, the fitness industry does not do well during a recession. The more than 15 million people unemployed and the uncertainty as a result of the novel coronavirus will be significant headwinds against continued increases in revenue. However, the company does offer financing options for consumers, which makes purchases more accessible. An offer at the company website as of this writing says that purchasers can acquire a Peloton bike with an all-access membership at $58 for 39 months. The price approaches that of a more premium gym membership but offers the convenience of in-home exercising. 

The rise in health consciousness, people's hesitation to leave their homes, and permanent gym closures are likely to drive Peloton's revenue growth throughout the pandemic and beyond. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.