When the stock market rallies, it's never a good thing to own a stock that doesn't go up. The market rebound to start the month of November has been like that for many investors, as some stocks are soaring even as others miss out on the broad move upward.

With high expectations among shareholders, companies that fall short in their financial results often get punished severely. That was the case for Sleep Number (SNBR -2.38%) and Upstart Holdings (UPST -5.62%), with both former high-growth companies facing big reversals and seeing their shares lose a huge amount of ground. Here's why so many of those following Sleep Number and Upstart were disappointed Wednesday morning.

A restless quarter for Sleep Number

Sleep Number shares were down 32% at the open on Wednesday morning. The sharp move lower for the bed and mattress maker followed the Tuesday afternoon release of third-quarter financial numbers that showed the ongoing impact of macroeconomic pressures on the company and the broader industry.

Sleep Number posted revenue of $473 million in Q3, which was down 13% year over year. That led to a loss of $2.3 million, or $0.10 per share, reversing a $5 million profit in the year-ago quarter.

Sleep Number CEO Shelly Ibach described Q3 as challenging, pointing to a shift in consumer demand halfway through the period that came as a surprise to the company. The mattress maker chose to implement new cost-reduction efforts in order to try to get ahead of the changing trend, as well as making adjustments to its marketing approach and amending its credit arrangements. Sleep Number hopes to save an extra $50 million in 2024 as a result of the cost-cutting measures.

Nevertheless, Sleep Number doesn't see conditions improving soon, and the company now expects to lose as much as $0.70 per share for the full 2023 year. With 40 to 50 store closures anticipated by the end of 2024, Sleep Number appears to have gotten ahead of itself during the strong period in 2021, and shareholders don't seem confident about when things will pick up again.

Upstart keeps struggling

Elsewhere, shares of Upstart Holdings were lower by 26%. The creator of an artificial intelligence-driven model for assessing credit risk and automating lending decisions reported disappointing third-quarter financial results that emphasized the difficulties that its lender clients are having right now.

Upstart posted revenue of $135 million, down 14% year over year. That led to an adjusted net loss of $3.9 million, which worked out to $0.05 per share and was slightly worse than what most of those following the company had anticipated.

The key problem Upstart is having is that its partners aren't originating as many loans as they did when economic conditions were more favorable. Rising rates have taken their toll on volume, with the company having seen just 114,500 loans originated during the period. That's down by more than a third from the same period a year ago, as higher interest costs have led many consumers to pull back on their borrowing. In addition, stresses on banks' balance sheets have caused some institutions to tighten their lending standards.

Upstart believes it could lose even more money in the fourth quarter of 2023, with revenue unlikely to make any progress in growing beyond Q3 levels. Even though the company keeps investing in AI to improve its credit-assessment models, some shareholders aren't happy to see how economically sensitive Upstart's business appears to be.