What happened

Shares of Peloton Interactive (NASDAQ:PTON) leaped 8% to a closing high of $75.96 on Friday, furthering their recent gains.

So what

More investors appear to be embracing a bull thesis laid out by Goldman Sachs' analysts earlier in the week. On Wednesday, analyst Heath Terry argued that Wall Street's growth estimates for Peloton were "far too low." 

A compass points to the word growth.

Peloton's growth potential is larger than you think. Image source: Peloton.

Terry predicts that Peloton will add 208,000 new subscribers in the fourth quarter, compared to the consensus estimate of 199,000, driven by pandemic-related fears that are keeping people out of gyms and boosting demand for the company's in-home fitness equipment. Looking further ahead, Terry believes Peloton's customer additions will surge to 274,000 in its fiscal 2021 first quarter, compared to Wall Street's estimates of only 105,000. 

In turn, Terry says this expectation-crushing growth could drive Peloton's stock price as high as $96, or about 26% above where they closed on Friday. 

Now what 

Investors have been underestimating Peloton since its initial public offering (IPO) in September 2019. Its stock plunged during the early stages of the pandemic until investors began to realize that peoples' fears of getting sick at gyms could result in sharply higher sales of Peloton's home fitness equipment. More people are beginning to catch on, but many investors are likely still understating just how powerful the home-based fitness trend is -- and, by extension, just how large Peloton can ultimately become.

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.