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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Applied Materials, (NASDAQ:AMAT) rallied 3% today after Jefferies initiated coverage on the chip equipment giant with a buy rating.

So what: Along with the bullish call, analyst Sundeep Bajikar planted a price target of $28 on the stock, representing about 36% worth of upside to yesterday's close. So while contrarian traders might be turned off by Applied's price strength over the past year, Bajikar's call could reflect a sense on Wall Street that its expansion prospects still aren't fully baked into the valuation.

Now what: According to Jefferies, Applied's risk/reward trade-off is rather attractive at this point. "We are confident the merger [with Tokyo Electron] would complete in 2H14, and translate into increased pricing power and scale benefits," Bajikar said. "We believe AMAT is best positioned among SemiCap players to benefit from a combination of 1) industry consolidation, 2) technology inflections, and 3) foundry competition. We expect higher margins and cash returns to drive multiple expansion." Applied shares hit a new 52-week high today and are trading at a P/E of 30, however, I'd hold out for a wider margin of safety before betting on those expectations.