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 Carrizo Oil & Gas, (NASDAQ:CRZO) gained slightly in pre-market trading after Imperial Capital initiated coverage on the oil and gas company with an outperform.

So what: Along with the bullish call, analyst Kim Pacanovsky planted a price target of $60 on the stock, representing about 17% worth of upside to yesterday's close. While contrarians might be turned off by Carrizo's share-price strength over the past year, Pacanovsky thinks there's more room to run given its rapidly improving fundamentals.

Now what: According to Imperial, Carrizo's risk/reward trade-off remains attractive. "The company recently raised its outlook for 2014 liquids growth to 50%, which leads to our estimate of EBITDA growth of 28% and year-end debt/EBITDAX of 1.7x (vs. 2.9x as of year-end 2012 and 4.1x as of yearend 2011), indicative, in our view, of CRZO's commitment to improving debt metrics," Pacanovsky said. "With its strong production, improved balance sheet, and ample liquidity, and trading at just 5.7x 2014 EV/EBITDAX, we believe CRZO shares are undervalued." Given Carrizo's still-hefty debt load, highly volatile shares, and red-hot price momentum, however, waiting for an even wider margin of safety seems prudent. 

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.