General Electric shares fell for a fourth straight day Monday after J.P. Morgan cut its rating on them to "neutral" from "overweight."
GE
The shares fell 2 percent to $28.55, after touching a 4-1/2 year low early in the session on the New York Stock Exchange.
General Electric is the parent of CNBC and CNBC.com.
J.P. Morgan said the second-largest U.S. company by market capitalization needed to sell off wide swaths of its operations to restore investor confidence.
With operations ranging from manufacturing jet engines, to producing television shows, to making consumer loans in emerging Asian economies, the conglomerate has become too complicated for investors to understand with any degree of confidence, analyst Stephen Tusa wrote in a note to clients.
GE shares have tumbled some 22 percent since the company stunned Wall Street with an unexpected drop in first-quarter profit that it blamed on weakness in its financial and real estate operations.
The Fairfield, Connecticut-based company, which is selling parts of its consumer finance arm and its century-old appliance business, needs to go further and consider divesting more of its consumer finance and NBC Universal media businesses and perhaps spinning off its health-care operation, he wrote.
"For investors to ever get comfort, there needs to be more transparency, which would be accomplished probably only through a dramatic portfolio restructuring," Tusa wrote.
A full restructuring, he wrote, would leave GE with its infrastructure arm -- which makes high-value heavy equipment including turbines used in power plants and railroad locomotives -- and the portions of its commercial finance business that serve that unit.
GE's finance operations have been a particular concern on Wall Street, with analysts and investors complaining that its size and complexity makes it difficult to understand.
GE is not the only industrial company facing trouble at its finance arm. Diversified U.S. manufacturer Textron on Friday cut the top end of its second-quarter profit forecast, citing difficulties at its finance operation.
Textron's finance arm last year represented about 10 percent of profits, while about half of GE's earnings come from its finance operations.
Tusa added that GE, well known for its focus on training and developing executives, may also face a "cultural issue" in which managers are unwilling to tell their bosses about problems at their operations.
"In an environment in which hitting numbers was religion, managers are paid to make the plan whatever way they can, and misses are not excused," Tusa wrote. "This may create a situation that lends itself to putting off the bad news to see if something opens up, a risky way to operate with investors, especially in a more challenging environment."
The $284.6 billion market capitalization of GE -- the only original component of the Dow Jones industrial average to remain in that indicator -- is now just $15 billion above that of Microsoft Corp, the No. 3 U.S. company by market value. Exxon Mobil Corp is No. 1.
J.P. Morgan also lowered its 2009 earnings forecast for the company to $2.30 a share from $2.42 to reflect challenges at its real-estate and aviation businesses.
GE shares are down 23 percent so far this year, a far deeper drop than the 8 percent slide of the Dow and the broad Standard & Poor's 500 index.