(FORTUNE Magazine) – The Marlboro cowboy is becoming an increasingly appropriate symbol for the U.S. tobacco industry, given that the great outdoors is about the only place left where you can smoke. Laws banning smoking in offices and restaurants are wafting from San Jose to Maryland. On top of that, the Food and Drug Administration has threatened to regulate cigarettes as a drug, while the President has proposed a 75-cent-per-pack tax increase in order to fund his health care plan. As Emanuel Goldman, PaineWebber tobacco analyst, puts it, ''Tobacco of the Nineties is the whiskey of the Twenties.'' Marlboro maker Philip Morris is responding to this new prohibitionism by attacking frontally. The company is suing Day One, an ABC news magazine that accused Philip Morris of doping cigarettes by adding nicotine, for $10 billion. Ads for the firm's Benson & Hedges brand poke fun at restrictions by picturing people grabbing a smoke on the wing of an airliner aloft. Since Philip Morris and RJR Nabisco Holdings, the No. 2 company in the U.S. tobacco market, together made $4 billion last year in domestic tobacco operating profits, it's understandable why the two are fighting so hard to protect their business. Top on their list of priorities: to recover from last year's ''Marlboro Friday'' price wars. After Philip Morris announced a dramatic price cut in April 1993, both companies saw their potential operating earnings sag and their stocks sink. Now industry pricing is recovering, but further increases are constrained by the threat of higher federal levies as well as by new state excise taxes. The good news for tobacco stockholders is that the health care taxes may not pass as proposed. Nicotine is the opiate of the masses -- some 55 million people in the U.S. smoke -- and too high a federal levy could be political suicide. If a new federal excise tax turns out to be lower than proposed, the tobacco companies, figuring that consumers were expecting to pay more for cigarettes anyway, may boost prices. RJR stock would benefit, as would Philip Morris's. Analyst Goldman predicts a Philip Morris share could go up from its current $50 price (see chart) to trade in the mid-60s.

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