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 Amazon's ( AMZN - Get Report) profitability could get worse before it gets better, on account of the tech behemoth's one-day shipping initiative, according to Morgan Stanley analyst Brian Nowak.

Nowak lowered his price target on Amazon to $2,200 from $2,300 on Monday morning, still representing 24% upside, while maintaining an overweight rating on the stock. Amazon shares were falling 1.42% to $1,768 a share Monday, compared to a 0.23% decline in the Nasdaq.

Nowak sees higher costs putting pressure on Amazon's operating profit for the near-term. "Bottom-up model shows how 1-day should bring faster growth but lower merchandise margins plus higher fulfillment/shipping. We expect fulfillment/shipping to improve, but rising 1-day mix plus lower merchandise margins should pressure EBIT [earnings-before-interest-and-tax]," Nowak wrote. 

He also noted that many of the goods sold in the one-day delivery time frame are lower priced items, estimating that the average order value (AOV) will be 65% lower that the "standard unit." This dilutes amazon's overall e-commerce gross margin, as Nowak lowered his 2020 gross margin forecast by nine basis points. Nowak also said the one-day shipping initiative, while a market share and revenue accelerator, involves elevated initial logistics costs, further pinching margins. 

Overall, Novak expects one-day shipping to adds 1% and 4%, respectively, to his 2019 and 2020 unit delivery estimates, and 1% of additional revenue for 2019 and 2020. But the cost pressures, in Nowak's eyes, will offset the higher revenues, as he now sees a 2% reduction to his EBIT forecast for 2020 and a 12% reduction for 2021. Over time, Morgan Stanley sees Amazon improving inventory management enough to cause these elevated logistics costs to abate. 

Morgan Stanley now expects GAAP-EBIT for Amazon of $14.57 billion in 2019 and $18.18 billion in 2020, lower than the Wall Street consensus of $14.75 billion and $21.05 billion. 

Amazon, Walmart (WMT - Get Report) and other big-box retailers are at the early stages of a race to become the most efficient and value-added one-day delivery retailer. 

Amazon shares are up 18% year-to-date. 

Amazon is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN? Learn more now. 

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