What happened

Shares of oil major Chevron (CVX 0.53%) got an early lift on Monday after two analysts (Cowen and Wells Fargo) raised price targets on the stock (to $185 and $199 a share, respectively), and only one analyst (J.P. Morgan) lowered targets -- to $143 a share.    

Up until just about noon ET, Chevron stock was rising on the news, gaining as much as 2% -- but then the bad news arrived: President Joe Biden may impose a "windfall profits" tax on oil companies. And as of 1:05 p.m. ET, Chevron stock's gains have been cut to just 0.5%.

So what

As the Associated Press reports, the White House is concerned about "major oil companies making record-setting profits even as they refuse to help lower prices at the pump for the American people." This jibes with a tweet from POTUS over the weekend, in which the president took aim at the oil companies' "billions in profits."

Granted, in that tweet, the president urged oil companies to "bring down prices at the pump." But based on today's AP story, it would appear that that request may come with a threat if the oil companies don't comply: The IRS may tax any billions oil companies earn as a result of not lowering prices.

Now what

Chevron, with $11.2 billion in net profit earned in the third quarter (less than ExxonMobil earned, but twice as much as ConocoPhillips' profit, according to data from S&P Global Market Intelligence), now appears to be in the president's crosshairs. So yes, early this morning, Wall Street on balance may have been thinking that Chevron looked undervalued -- indeed, at 12 times trailing earnings, with a near-15% projected long-term earnings growth rate and a 3.2% dividend yield, I'd argue Chevron is undervalued.

But if part of Chevron's profits get blown away by a government windfall profits tax, pretty soon, Chevron stock may not look so cheap anymore. While the president's tax threat isn't certain to come to pass, this is a risk investors should start factoring into their valuations right about now.