What happened

Shares of Sleep Number (NASDAQ:SNBR), which makes high-tech beds and bedding products, fell a dramatic 17% at the open of trading on July 21. An hour into the trading day the stock was still off by roughly 12%, so much of the loss was sticking. The company's earnings announcement after the close on July 20 was the driving force here.

So what

At first blush, Sleep Number had a pretty good quarter. Indeed, second-quarter sales advanced 70% year over year and were up 36% from the second quarter of 2019. For the first six months of the year sales were 35% higher than they were in 2019. Earnings of $0.88 per share was up from a loss of $0.45 per share in 2020. Through the first six months of 2021, meanwhile, EPS was $3.44, up from $0.93 in 2020 and $0.95 in 2019. Management even raised its full-year 2021 earnings guidance by roughly 12%. So far so good.

A couple sitting in bed looking at a computer.

Image source: Getty Images.

The problem is that Wall Street consensus had been looking for more on both the top line and the bottom line. On the earnings side, analysts had been predicting around $1.11 per share, which the $0.88 actual result missed by a wide margin. Also troublesome was the company's mention that supply constraints had limited deliveries in June and July. Although the company believes it has addressed the issue, it adds uncertainty. Since investors don't usually like when companies miss Wall Street's call, and also aren't fond of uncertainty, it's not really shocking that the stock fell.

Now what

All of that said, a big part of the problem is that Sleep Number's stock has more than doubled over the past year. In other words, investors have likely built in some pretty lofty expectations. Coming in shy of the mark, despite providing an upbeat outlook for the rest of the year, seems to have made some bulls question their commitment here.

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.