Mobile phone sales are falling, but try telling that to analysts covering

Apple

(AAPL) - Get Report

,

Palm

(PALM)

and

Research In Motion

(RIMM)

.

As more people trade in their cell phones for smartphones, analysts are finding new sales assumptions to plug into their financial models, sparking a new round of raised forecasts.

Morgan Stanley analyst Karen Huberty upgraded Apple to buy from hold Tuesday calling the iPhone the "core" that will drive higher sales to

offset declines in Mac and iPod sales

.

Though the iPhone is entering its third year, Huberty sees no signs of slowdown ahead and predicts that Apple will cut the price of the phone to further juice sales.

"We expect a price cut to the current generation iPhone to drive 50% to 100% incremental unit demand," Huberty wrote in her note. She also raised her price target for Apple to $180 from $105 previously.

As

TheStreet.com

reported earlier this month,

AT&T

(T) - Get Report

was

considering a lower-priced calling plan

for the iPhone to help drum up more business from less affluent consumers.

Part of the bullishness stems from wireless phone trends, which are headed in opposite directions. Overall mobile phone sales fell 9.4% in the first quarter compared with year-ago levels, but smartphone sales surged nearly 13% in that same time period, according to a recent Gartner report.

Smartphones have also been catching on in new markets. A

Google

(GOOG) - Get Report

Android powered HTC phone is

now selling in China

, according to

The Wall Street Journal

.

The new smartphone category is still wide open, RBC analyst Mike Abramsky writes in a note Tuesday. Abramsky raised his price target on Palm to $14 from $12 Tuesday in anticipation of strong demand for the new Palm Pre phone.

"The smartphone market can support multiple entrants," Abramsky writes. It's not Palm against Apple, RIM, Google, but rather smartphones in general against conventional phone makers like

Motorola

(MOT)

and

Nokia

(NOK) - Get Report

, Abramsky notes.

BlackBerry fans, of course, are encouraged by this expanding smartphone pie. Analysts at BMO Capital raised RIM's stock price target $10 to $82 on a prediction that BlackBerry sales are growing robustly, while expenses are remaining stable.

The coming months will offer a heated showdown in the smartphone arena, as all players prepare their big new models for the year.