Roblox (RBLX) is likely to report Q3 results above analyst expectations driven by rising user activity and improving monetization trends, though management is likely to remain cautious in its outlook, Wedbush said in a report Friday.

Average concurrent users rose about 128% year over year in Q3 and app daily active users climbed 81%, according to data from Similarweb, implying 135 million to 140 million DAUs versus the Street's 128.1 million estimate, the report said. That supports potential bookings of $1.78 billion to $1.85 billion and adjusted earnings before interest, taxes, depreciation, and amortization of $450 million to $475 million, both above consensus forecasts, according to Wedbush.

Wedbush said recent hit games underscore Roblox's platform strength and ability to drive organic engagement. Looking ahead, the firm expects long-term upside from advertising and a higher revenue share for developers that could attract major franchises.

Wedbush maintained its outperform rating on Roblox with a $165 price target.

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