NEW YORK (Reuters) - A JP Morgan analyst who has long held a negative outlook on General Electric Co GE.N shares as they have tumbled upgraded his view on the conglomerate's stock on Thursday.

GE shares surged after JP Morgan analyst Stephen Tusa raised his rating on GE shares to “neutral” from “underweight.” Tusa initiated his bearish call on the stock on May 12, 2016; since that time, the stock had dropped 77.7 percent through Wednesday, and slumped to more than nine-year lows, amid struggles for GE’s power business and concerns about its high debt.

GE shares jumped 10.7 percent to $7.43 in Thursday morning trading in heavy volume.

The analyst, who also noted that GE is being removed from JP Morgan’s analyst focus list as a short idea, said in his report that the challenges GE faces are better understood, as opposed to being overlooked by those who have been bullish on the stock in the past.

Tusa kept his $6 price target for the stock, while noting downside risk to $5.

“The risk/reward ... is now more balanced in the near term, in our view, and we recommend investors step aside,” Tusa wrote in a note.

In October GE posted a loss of $22.8 billion for the third quarter, as it slashed its dividend and said it faced a deepening federal accounting probe. New Chief Executive Larry Culp said last month the company will sell assets with “urgency” to reduce its high debt.

GE said on Thursday its digital unit would sell a majority stake in ServiceMax, a cloud-based provider of software used in inventory and workforce management. GE will retain a 10 percent equity in ServiceMax, a business it acquired for $915 million in 2016.

GE shares, which were removed from the blue-chip Dow Jones Industrial Average .DJI earlier this year, have tumbled more than 50 percent this year alone.

In his note, Tusa said a “material equity raise” from GE “could be necessary.” While that could pressure the stock in the near term, Tusa said “an equity raise is important, in our view, as it would help to blunt the chief risk we see in a downturn, namely the balance sheet.”

“We now believe a more negative outcome on the liabilities (equity dilution for one) is at least partially discounted, and it’s possible that the company can execute its way through an elongated workout that limits near term downside,” Tusa said.