While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Big Lots (NYSE:BIG) climbed 2% in premarket trading Monday after KeyBanc upgraded the closeout retailer from hold to buy.

So what: Along with the upgrade, analyst Bradley Thomas planted a price target of $45 on the stock, representing about 21% worth of upside to Friday's close. So while contrarians might be turned off by Big Lots' sharp share spike over the past month, Thomas' call could reflect a strengthening sense on Wall Street that its turnaround potential still isn't fully baked into the price.

Now what: According to KeyBanc, Big Lots' risk/reward trade-off remains rather attractive at this point. "[CEO David Campisi] is implementing an 'Edit to Amplify' strategy to improve stores' shoppability for 'Jennifer,' its core customer," said Thomas. "While this strategy is overarching and likely to be the most important earnings lever for BIG in the coming years, our analysis suggests investors receive this effort as a 'call option,' as several other initiatives have the potential to significantly improve earnings on their own. First, BIG is exiting Canada, eliminating its drag on earnings and focusing management's time on the core business. Additionally, BIG plans for continued share repurchases, supported by its strong FCF outlook." When you couple the intense competitive headwinds still facing Big Lots -- from both brick-and-mortar behemoths and online disruptors -- with its red-hot stock price, however, I'd wait for a much wider margin of safety before jumping in. 

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Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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