These 2 Stocks Are Fizzling Out After Hours Thursday

Stock markets finally lost their upward momentum on Thursday, as early gains turned into substantial losses. The Dow Jones Industrial Average (^DJI -0.77%) broke its 13-day winning streak, and the Nasdaq Composite (^IXIC -1.49%) and S&P 500 (^GSPC -1.11%) both suffered losses of more than half a percent on the day.

Data source: Yahoo! Finance.

The downbeat mood continued after the closing bell, as afternoon earnings reports sent some shares sharply lower. Enphase Energy (ENPH -1.21%) and Sleep Number (SNBR -2.38%) were two of the hardest-hit stocks in the market after hours. Here's everything you need to know in order to understand the downward moves and what they mean for the companies' prospects.

Enphase posts mixed results

Shares of Enphase Energy were down 13% in after-hours trading on Thursday afternoon. The maker of solar energy system equipment reported second-quarter financial results that suggested some areas of weakness, despite showing solid year-over-year growth.

Enphase's numbers for the second quarter looked good on the surface. Revenue climbed to $711 million, up 34% from year-ago levels. Net income more than doubled year over year to $157 million. On an adjusted basis, earnings came in at $1.47 per share.

However, under the surface, there were some mixed signals. On a sequential basis, sales were down 2% from the first quarter of 2023.

Although revenue in the European region was up 25% from three months ago, U.S. sales slumped 12% due to macroeconomic conditions. Moreover, battery shipments fell 20% from first-quarter levels to 82.3 megawatt-hours.

Nevertheless, Enphase is optimistic about its future. It started shipping microinverters from its South Carolina-based contract manufacturer Flex during the period and authorized a new $1 billion stock buyback program to replace the $500 million program that it completed during the quarter.

Even so, shareholders weren't pleased with guidance for just $550 million to $600 million in revenue for the third quarter. Despite some benefits from newly enacted legislation, Enphase hasn't been able to charge up investor sentiment the way it has in the past.

Sleep Number delivers a nightmare to shareholders

Shares of Sleep Number fell even more sharply, posting a 27% drop after hours Thursday. The maker of mattresses and other products has suffered from falling demand due to weakness in the economy, and its second-quarter financial results did little to restore confidence in its near-term future.

Sleep Number saw revenue drop 16% in the second quarter, compared to year-ago levels, weighing in at $459 million. The company's profits almost completely disappeared, with earnings going from $1.54 per share in the year-earlier period to just $0.03 per share in the just-completed quarter. That drop in earnings came despite a substantial reduction in operating expenses, largely because Sleep Number enjoyed some high-margin business a year ago that didn't recur in the current-year period.

Sleep Number doesn't expect a quick recovery. It revised its full-year earnings guidance to a new range of $1.25 to $1.75 per share and expects to see sales down in the low- to mid-single-digit percentages for the year, compared to 2022 levels.

Over the long run, Sleep Number's efforts to improve gross margin could pay off. But under challenging economic conditions, it's a lot to expect consumers to keep paying up for premium consumer discretionary products if their own personal financial conditions are under pressure.