On yet another down day in the market, investors may not be surprised to see some red on the screen. However, for investors in online car retailer Carvana (NYSE:CVNA), today’s price action may be surprising to see. At the time of writing, CVNA stock is down approximately 14% for what appears to be no fault of its own.

Rather, competitor CarMax (NYSE:KMX) reported earnings earlier today, beating expectations by a wide margin. The company’s cost-cutting measures and better-than-expected retail sales drove impressive earnings per share of $1.44 for the used vehicle retailer. The company noted that despite a “challenging macro environment,” its efforts in streamlining its cost structure led to this outperformance. Notably, the company’s selling, general and administrative expenses (SG&A) declined nearly 15% year-over-year, offsetting much of the decline in retail and wholesale volumes over the past year.

It appears investors are taking the view that now CarMax is in, and Carvana is out. Let’s dive into what to make of these results and if this is the right call.

Why Is CVNA Stock Sinking Today?

CarMax and Carvana are two companies that are often compared to each other and used as benchmarks for the online versus in-person retail of automobiles. Many macro forces can drive the stocks in the same direction, but certain events can lead to large divergent moves between the two competitors.

CarMax’s results appear to provide investors with an overall thesis that online car buying activity may continue declining following an impressive surge tied to the pandemic. Certainly, most investors are aware that pandemic-related tailwinds have ceased. However, many investors looking for growth at a reasonable price may have looked to jump into CVNA stock, given its decline relative to its peers and other tech companies.

That said, in the race for market share, CarMax appears to be gaining ground on its online peers. That’s not great for Carvana, and given the aforementioned macro headwinds noted by CarMax’s management team, this environment won’t be kind to companies that aren’t aggressively cutting costs.

Thus, investors in Carvana will undoubtedly seek more insights from the company on its plans to cut costs moving forward. We’re in an efficiency cycle in the markets, and investors are clearly looking for pair trades to play various sector-specific moves right now. Currently, it appears the long-KMX, short-CVNA trade is alive and well.