NEW YORK ( TheStreet) -- Playboy ( PLA) shares spiked Wednesday after Caris analyst David Miller upgraded the company to above average from average, and raised his price target to $6.50 from $5.

Miller believes that the stock price could continue to climb as company founder Hugh Hefner has the means to take the company private.

In July, Hugh Hefner proposed to acquire all outstanding shares at a purchase price of $5.50 a share. Hefner, who founded Playboy Enterprises in 1957, currently owns 69.5% of the company's Class A stock and 27.7% of Class B stock.

Playboy went public in 1971, but circulation and revenue have been down in recent years. Hefner's proposed deal values the company at $185 million.

Miller says that Hefner is capable of paying $6.50 a share, which would be about a 28% premium over the current trading price of around $5.10.

"Reliable sources on the ground are telling us that, not only does Mr. Hefner's bid now have the necessary financing at $5.50, but that the financing in question could allow Mr. Hefner to raise his bid to $6.50, offering 28% upside from current levels," Miller said in his Dec. 22 research note.

Miller said that the company will benefit from new its new Playboy-themed resort in London, which he expects will open in July 2011.

Shares of Playboy spiked in early morning trading to $5.24, but have since leveled out and are trading around $5.10.

-- Written by Theresa McCabe in Boston.

>To contact the writer of this article, click here: Theresa McCabe.

>To follow the writer on Twitter, go to @TheresaMcCabe.

>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.