UBS has set a target price of 450p for Royal Mail shares and is advising investors in the stock to sell their holdings ahead of the investment bank's appearance in front of a parliamentary committee.
UBS will be questioned over its role advising the government on the controversial flotation, alongside co-advisers, Goldman Sachs.
Critics have attacked the government on the accusation that Royal Mail was undervalued with its offer price of 330p a share. Since the flotation, Royal Mail shares soared to a peak of around 587p, though they have fallen back to around 542p at the time of publishing on 20 November.
"Royal Mail remains a company in the midst of transformation, having come a long way over the past few years," said the UBS research note.
"With a change in regulation 18 months ago, investment in automation as well as a focus on benefiting from the growth in e-commerce, RMG has done well, in our opinion.
"However, we believe there remain risks, including: continued letter mail volume declines; the inability to reduce the workforce beyond 2-3% pa; the requirement to invest heavily in parcel automation; and the risk from competition in both letters and parcels.
"Our key concern is that at the current valuation, the market's expectations are too high."
Business Secretary Vince Cable has defended the offer price, which the government set after advice from its "Global Co-ordinators" Goldman Sachs and UBS (GloCos).
In a letter to the Business, Innovation and Skills (BIS) Select Committee, Cable said the process of valuation ahead of the flotation "comprised a combination of rigorous market testing and extensive analysis of comparable companies in the sector."
This process included meeting with the institutional investors likely to buy Royal Mail shares.
"Given final demand indications from the GloCos, it was agreed that 330p was an appropriate valuation of our shareholding," wrote Cable.
"This was endorsed by Lazard," the government's independent adviser.
He also admitted that he had, late on, considered a higher offer price - but decided against it.
"Revising the price range upwards late in the bookbuild was considered given the demand generated," Cable wrote.
"However this was not pursued based on an assessment of the composition of demand in the order book and an assessment of where demand would taper off, especially from informed potential long-term investors."
Goldman, UBS and Lazard are all appearing in front of the BIS committee to face questioning over the offer price.
In the lead up to the flotation on the London Stock Exchange, Royal Mail shares were oversubscribed amid intense demand from both retail and institutional investors.
Ahead of the Royal Mail sell-off, investors were able to apply for up to £10,000 worth of shares at a price of 330p. The share offering was over-subscribed, though 95% who applied got at least the £750 minimum investment's worth of 227 shares.
Royal Mail staff were allocated 10% of Royal Mail shares. Of the rest made available, 67% were for institutional investors and 33% for retail investors.