What happened

Shares of First Solar (FSLR -0.88%) beat the market by a wide margin in September, with shares gaining 3.7%, according to data provided by S&P Global Market Intelligence. While such gains wouldn't normally be reason to celebrate, they came as the S&P 500 and Nasdaq Composite languished deep in the red, sinking 9.6% and 10.3%, respectively.

The solar-panel maker got a boost from growing analyst enthusiasm regarding the potential benefits from the Inflation Reduction Act (IRA) of 2022, which could help line the company's coffers.

So what

In mid-August, President Joe Biden signed the IRA into law, and optimism has been building among analysts regarding the potential for climate measures in the sweeping legislation to boost First Solar. Goldman Sachs analyst Brian Lee issued a rare double upgrade on First Solar to buy from sell, nearly tripling the company's price target to $172, up from $60. That represents potential gains for investors of 30% from the stock's closing price on Thursday. The analyst views the company as the best positioned and most immediate beneficiary of the manufacturing credits and increased demand resulting from the IRA. 

Susquehanna analyst Biju Perincheril took a similar stance, maintaining his positive (buy) rating on the shares, while simultaneously raising his price target on First Solar to $175 from $120, or potential upside of 33%. Like his peer from Goldman Sachs, the analyst updated his model to include solar-manufacturing tax credits from the IRA, as well as First Solar's announced plans to increase its capacity. 

Evercore ISI analyst Sean Morgan jumped on the bandwagon, upgrading First Solar to outperform (buy) from in-line (hold), while nearly doubling his price target to $150 from $88, or potential gains of 14%. The catalyst for the move? You guessed it -- the potential for the IRA to increase domestic production and demand. 

If you think you're seeing a pattern here, you're right. One of the biggest provisions of the IRA is the reinstatement of the 30% residential clean-energy tax credit for consumers who install solar panels, extending the credit through 2033. Furthermore, the legislation expanded the credit to include commercial installation and battery-storage equipment. 

Now what

First Solar isn't resting on its laurels. The company immediately announced plans to invest $1.2 billion to scale its production of solar power in the U.S. by 4.4 gigawatts (GW) DC. This will include a new 3.5 GWDC facility in the U.S. Southeast and expansion of production capabilities at its Northwest Ohio facility. 

Furthermore, First Solar announced that it inked an agreement with Azure Power Global Limited to supply 600 megawatts DC of its high-performance, advanced thin film photovoltaic solar modules, manufactured at the company's new facility in Tamil Nadu, India, which is expected to go on-line in late 2023. 

It will be some time before investors understand the full value of the recent legislation for First Solar, but it's clear the company will reap the benefits for years to come. That makes the solar-panel maker a solid buy.