It may be only a matter of time before the A2 Milk Company Ltd (ASX: A2M) share price hits a fresh record high.
Shares in the milk formula company jumped 1.3% to $18.54 during lunch time trade after it upgraded its profit guidance. The stock hit an all-time high of $19 just last week.
In contrast, the S&P/ASX 200 Index (Index:^AXJO) fell 1% with most sectors trading in the red on renewed worries about the economic damage from the COVID-19 pandemic.
Best defensive stock
But the lockdown of the global economy is proving to be a tailwind for A2 Milk. Demand for its products is surging due to panic buying.
There are very few ASX shares that can benefit from the coronavirus mayhem, but A2 Milk is among the best placed to grow sales during this trying time.
"The extent revenue is truly defensive is being tested by COVID-19," said JP Morgan.
"A2M is the most defensive revenue stream and is seeing its route to market being supported by efforts from partners (e.g., MBS (Mother & Baby Stores) in China) while it enjoys a shift to in-consumption due to social distancing."
Don't cry over spilt milk
However, the broker thinks its too late to buy the stock despite these positives and rates the stock as "underweight" (or "sell").
The A2 Milk share price overshot JP Morgan's fair value target of $16.11 and is trading on a lofty FY21 price-earnings (P/E) multiple of around 32 times.
More appetising alternative
But there may be a better alternative in the sector to A2 Milk. JP Morgan is recommending fast food delivery chain Domino's Pizza Enterprises Ltd. (ASX: DMP) as "overweight" (or "buy") instead.
With more people stuck at home and all eating establishments shuttered (except for takeaway), Domino's may have an opportunity to ramp up sales here and in parts of Europe where it operates.
Growing demand
It also helps that the pizza franchise offers cheap eats. The looming global recession will hurt household spending and will likely force consumers to look for better value alternatives.
History has shown that low income households consumer more fast food than their better off peers. There's little doubt that more consumers in Australia and around the world will be pushed into poverty.
"DMP is forecast to be a share winner due to its delivery focus, with some trial now a way to address the low (4%) delivery market share in the large pizza market of France," added JP Morgan.
Foolish takeaway
The stock is trading on a FY21 P/E multiple of 25 times, based on the broker's estimates. JP Morgan's price target on Domino's is $57.50 a share.
But if you are looking for other well-priced ASX stocks to buy in this downturn, you will want to read this free report from the experts at the Motley Fool.
Follow the free link below to find out more.
