Rackable Systems (RACK) shares are trading higher after Canaccord Adams analyst Mark Kelleher upped his rating on the stock to Buy from Hold, and raised his price target to $12.20 from $8.67. Kelleher likes the prospects for the company’s modular data centers business.

Kelleher says the company should meet his Q1 estimate of $80 million in revenue and break-even profits; he thinks the company can meet its 2008 guidance of $353 million to $388 million in revenue and EPS of 17 cents. Kelleher sees 2009 revenue of $383 million and profits of 16 cents.

RACK today is up 73 cents, or 7.5%, to $10.42.