Shares of motorcycle manufacturer Harley-Davidson (HOG)  fell 1.17% to $58.33 in Tuesday afternoon trading even after RBC Capital Markets upgraded the stock.

RBC raised its rating on the shares to "sector perform" from "underperform" in a research note circulated to investors Tuesday morning. It raised Harley-Davidson's price target by $11 to $57 in the process. RBC said the stock could reach as high as $62 if Harley-Davidson improves its top-line growth figures and operating income margins in 2017.

Concern over dealer inventory and difficult industry demand had driven down RBC's expectations for the company, which reported a 7.1% year-over-year drop in quarterly U.S. motorcycle sales when it reported its third-quarter earnings on Oct. 18. Global sales dropped 4.5% year-over-year.

Harley-Davidson reported earnings of 64 cents per share on roughly $1.27 billion in revenue for the quarter. The company said it planned to lay off some employees and streamline its operations in the fourth quarter at a cost of $20-to-$25 million.

The potential for economic growth now has the bank changing its tune.

"Near-term, if the economy is stimulated and construction jobs increase, Harley-Davidson could see some better demand," analyst Joseph Spak wrote.

However, RBC still remains cautious of the market for high-end motorcycles, which, as a leisure good, are particularly sensitive to the economic cycle.

"This was readily apparent during the most recent market downturn and another potential downturn may also prove detrimental to future profitability," Spak wrote.

HOG Chart HOG data by YCharts

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