NEW YORK (Reuters) - Shares of Philip Morris Cos. Inc. and other tobacco stocks fell on Thursday after a Los Angeles jury ordered the cigarette giant to pay a record $3 billion in damages to a California smoker.

The award, made to Richard Boeken, a Marlboro smoker with incurable lung and brain cancer, was the largest individual punitive damages award ever against a cigarette maker. It was announced on Wednesday after the market closed. ``The verdict is shocking. It shocks the senses.'' David Adelman, tobacco industry analyst at Morgan Stanley, said of the initial investor reaction to the verdict. But analysts and even tobacco industry opponents said the verdict was likely to be reduced by the judge or overturned completely on appeal. Shares of Philip Morris, which makes Marlboro and other brands, were down 4.5 percent, or $2.25 at $47.75 by early afternoon on the New York Stock Exchange. R.J. Reynolds Tobacco Holdings Inc. was down 5.1 percent, or $3.01, at $55.87. British American Tobacco Plc, the world's second-largest cigarette maker, closed 3.23 percent lower in London. Loews Corp., parent of Lorillard Tobacco Co., was down 3.97 percent, or $2.70 at $65.32. Vector Group Ltd., parent of Liggett Group Inc., was down 2.28 percent, or 78 cents, at $33.40. ``I think that stocks will open down somewhere between 5 and 8 percent and then over the next few weeks, I would expect the markets to digest the news and to begin to understand that the threat is not nearly as great as the headlines,'' Martin Feldman, tobacco industry analyst at Salomon Smith Barney, said before the market opened. A LONG LEGAL PROCESS In the case, the Los Angeles Superior court jury awarded $3 billion in punitive damages and $5.5 million in compensatory damages to a securities and oil broker whose lung cancer has spread to his brain. The jury found against the company -- which earned almost $11 billion last year from tobacco sales alone -- for fraud, negligence, and making a defective product. Philip Morris had conceded that cigarettes were addictive, but said warnings on cigarette packages made it clear they cause cancer. The company has argued that the jury had been given improper instructions and prevented from hearing key evidence. William Ohlmeyer, associate general counsel and vice president at Philip Morris, vowed that the verdict was just the beginning of a long legal process. ``We are optimistic the appellate court will agree with us that this jury either was not given the correct instructions of law, was not allowed to consider the appropriate evidence, or quite frankly just ignored all that and substituted their judgement for the court,'' he said in an interview with CNN. William Pecoriello, an analyst at Sanford Bernstein, estimated that the courts will find the award unconstitutionally high and lower the damages to somewhere in the $20 million to $100 million range, consistent with prior California rulings. ``Looking at history, the chances are that it may not stand at this size,'' conceded Patti Lynn, associate campaign director of corporate watchdog group Infact, which has battled tobacco companies over their marketing practices. ``But there's always a first time, also.'' MESSAGE SENT But anti-tobacco forces also said the verdict should send a message to the industry. ``It's encouraging, because that jury looked at the industry and they were mad,'' J.D. Lee, a Knoxville, Tennessee-based lawyer who has litigated against the industry, said. ``It's very encouraging that juries are recognizing the damage the industry has done.'' Tobacco stocks had traded up in recent weeks as litigation concern had waned. And even with the ruling, fund managers did not appear to be running for the exits. ``We are doing nothing at this point of time,'' Tim Drake, who follows tobacco stocks at Banc One Investment Advisors, which has ''significant'' holdings of Philip Morris and R.J. Reynolds and also holds some Loews stock. He said he expects the tobacco companies to lose some individual cases before juries, but will wait and see what happens on appeal. Morgan Stanley's Adelman said that after the initial downturn in tobacco stocks Thursday, there could be a cap on how high the stocks could rebound in the near term. ``I think you put into the market the issue of questioning how good the legal environment can get,'' Adelman said. But he added that longer-term, ``Boeken is going to be viewed as just one of many of the temporary adverse developments that have affected tobacco litigation.''

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