What happened

Shares of First Solar (FSLR 2.94%) jumped 28.6% in August, according to data from S&P Global Market Intelligence. Powering the solar panel maker's surge was the passive of the Inflation Reduction Act (IRA), which will benefit the company's operations. 

So what

President Biden signed the IRA into law last month. It includes a $369 million investment in climate and energy policy. Key features include the extension of the investment tax credit and domestic manufacturing tax credits. 

Analysts view First Solar as a major beneficiary of this new legislation. Several upgraded the stock last month. For example, Guggenheim analyst Joseph Osha raised the firm's rating from neutral to buy while giving shares a $135 price target. Osha noted that "investors have not fully digested how transformational the IRA could be for First Solar's business."  

Meanwhile, Bank of America analyst Julien Dumoulin-Smith upgraded shares from neutral to buy and increased their price target from $104.50 to $141 per share. The analyst noted that the market hasn't yet priced potential benefits from the IRA into the stock. The analyst believes that Wall Street isn't fully recognizing the level of cash credits the company will receive from the new law, noting that it would likely use the cash to expand. 

That's exactly what First Solar intends to do. In late August, the company unveiled plans to invest up to $1.2 billion to expand its U.S. solar panel manufacturing capacity. It announced a strategy to invest up to $1 billion in a new 3.5-gigawatt (GW) DC manufacturing facility in the U.S. southeast. In addition, the company plans to invest $185 million to upgrade and expand its Northwest Ohio manufacturing capacity by 0.9 GWDC. These investments will grow First Solar's U.S. manufacturing capacity to over 10 GWDC by 2025 while expanding its global footprint to more than 20 GWDC. Meanwhile, it continues to evaluate additional opportunities to add to its manufacturing capacity. 

Now what

The IRA should support additional solar power expansion in the U.S. over the next several years. It's giving First Solar the confidence to boost its investments and increase its manufacturing capacity, setting it up to grow faster in the coming years. That should enable the company to create even more value for shareholders as it capitalizes on accelerating solar energy development in the U.S. over the next several years.