After a few years in the wilderness, Qualcomm, Inc. (NASDAQ:QCOM) has become one of the more interesting stocks in the market. The QCOM stock price has gained almost 30% just since late October, thanks mostly to a buyout offer from Broadcom Ltd (NASDAQ:AVGO).

Of course, those gains followed a difficult 2017, highlighted by a legal battle against Apple Inc. (NASDAQ:AAPL). The QCOM stock price actually remains modestly negative this year. All the while, Qualcomm has been trying to close its $47 billion acquisition of NXP Semiconductors NV (NASDAQ:NXPI), while activist Elliot Advisors (UK) is fighting for a higher price.

There’s a lot to unpack here. But at first blush, it would seem QCOM stock has more upside. After all, Broadcom’s initial, albeit rejected, offer was for $70 per share, mostly in cash. Yet the QCOM stock price sits below $65 — with a second offer from Broadcom highly likely, as Luke Lango argued this week.

But from here, $64+ looks about right. The drama at NXP could complicate matters. Qualcomm hasn’t shown any interest in a takeover. Broadcom is gearing up for what would be a huge proxy fight, and even an agreed-to deal will face a lengthy regulatory review.

Given not only the risks involved with a buyout, but also the time it would take to actually close, the upside in the QCOM stock price probably is much, much less than it appears. And that suggests moving to the sidelines as Qualcomm figures out its next steps.

Is a Second Offer Coming?

Lango estimated the probability of a second offer from Broadcom at 75% — but I actually think that estimate is low. The QCOM stock price is just above $64. Broadcom’s initial offer was for $70 per share, with $10 per share of that in cash.

Assuming Qualcomm had accepted that offer, it’s likely QCOM still would be in the $65 range. That $70 from AVGO would no doubt take at least a year for shareholders to receive, which alone knocks ~5-6% off the present value. Add the risk of the deal failing and it’s possible that the QCOM stock price would be lower than the current $64 if it had agreed to a deal.

A good parallel is the acquisition of Aetna Inc (NYSE:AET) by CVS Health Corp (NYSE:CVS). CVS’ headline offer was for $207 per share, yet AET trades at just $181 right now — a 13% discount to that price. QCOM’s discount to the offer would likely be narrower, but the discount would still exist.

My broader point here is that Qualcomm is presently trading at about the same level it would have had it accepted the deal — which it didn’t. Yet, Broadcom has launched a proxy fight, nominating 11 directors to the Qualcomm board. There’s almost no way the company would make that move without expecting a higher offer, because few shareholders would be interested in taking the current one. Any shareholder voting “yes” for Broadcom nominees would be running the risk of sending the share price lower or, at best, capping the near-term upside.

Will Qualcomm Accept?

It’s illogical for Broadcom to start a proxy fight without a higher bid in its pocket. Speculation suggests that the new bid will be in the $80 range, but, whatever it is, logic dictates that it will have to be notably higher than the initial bid for this process to move forward.

The question is whether Qualcomm will accept. According to the proxy statement filed by Broadcom, Broadcom CEO Hock Tan met with Qualcomm CEO Steve Mollenkopf twice in 2016 to discuss a potential combination. After an early 2017 phone call, Mollenkopf said he “would reflect on the matter and then get back to Mr. Tan.”

He never did.

In short, Qualcomm wasn’t interested in a deal. In fact, less than two months after the second meeting with Tan, Mollenkopf announced the NXPI acquisition, which, given its size, might even be seen as a bulwark against Broadcom’s interest.

So far, there’s no evidence Qualcomm has changed its mind about selling. And it’s worth noting that NXP could be a monkey wrench. Broadcom’s deal is valid whether or not Qualcomm closes that acquisition — but only if the purchase “is consummated on the currently disclosed terms of $110 per share.”

What This All Means for the QCOM Stock Price

So, the problem for the QCOM stock price in 2018 is going to be just how many moving parts there are. Even assuming Broadcom is willing to offer $85/share, Qualcomm has to accept that offer. It has to get the NXPI deal done at $110/share — or convince Broadcom to change the terms of its offer. With NXPI trading near $117, the market clearly thinks the original price is unlikely. And, then, what would be the largest tech deal in history has to pass regulatory muster.

It’s a lot to ask and it will take time. Admittedly, the Qualcomm dividend likely would mitigate some of the cost of waiting, as, at $80/share, Qualcomm investors still would receive almost a 3% yield. Even with that, however, assuming a deal closes in mid-2019 at $85/share would value QCOM stock, right now, at about $77. A deal break probably values the stock in the low-$50s, back toward levels seen before the Broadcom deal was announced.

That, in turn, suggests the market is pricing in a 40-50% chance of the deal going through — which seems about right. $85 might be too much for Broadcom to pay. NXP could scuttle the deal if Qualcomm is intent on making that purchase. Qualcomm may not be interested in a Broadcom tie-up. And any bad news on the legal front with Apple adds another layer of risk.

From here, the fact that the QCOM stock price has settled so far in December makes some sense. Based on what we know, the price looks about right. With a lot more news coming in 2018, that price no doubt will change.

It’s predicting the direction of that change that’s the hard part.

As of this writing, Vince Martin has no positions in any securities mentioned.