ONI Systems shed $7.75, or 10 percent, to $73.31 Wednesday, one day after it topped analysts' estimates in its third quarter.
In the quarter, ONI Systems (Nasdaq: ONIS) earned $16.2 million, or 14 cents a share, on sales of $16.4 million.
First Call Corp. consensus expected the maker of optical networking equipment to lose 18 cents a share in the quarter.
In the year-ago quarter, it lost $8.4 million, or 42 cents a share, on sales of $742,000.
On Wednesday, CS First Boston started the stock with a "strong buy" recommendation.
Robertson Stephens analyst Paul Johnson upped his fiscal 2000 and 2001 estimates to a loss of 56 cents a share and a loss of 20 cents a share, respectively while reiterating his "buy" recommendation.
"The upside surprise in the quarter was driven by continued strong demand for ONI’s products, in what is essentially only the company’s third quarter shipping products," he said in a research note.
In the quarter, gross profit margins improved to 32.1 percent, up from 27.6 percent in the second quarter.
Including a variety of charges, ONI Systems posted a net loss of $35.1 million, or 30 cents a share, in the quarter.
Last quarter, ONI Systems beat the Street when it posted a loss of $20 million, or 18 cents a share, on sales of $9.5 million.
Its shares raced up to a 52-week high of $142 in June before slipping to a low of $51.63 earlier this month.
All five analysts tracking the stock rate it either a "buy" or "strong buy."
First Call Corp. consensus pegs the San Jose, Calif. company for a loss of 75 cents a share in the fiscal year.