The company’s full-throated embrace of bitcoin has dramatically shifted those perceptions. In August of last year, MicroStrategy announced the adoption of bitcoin as its “primary treasury reserve asset.” The company said at that time that it had purchased $250 million worth of the cryptocurrency, and it has only stepped on the gas since. This week brought the company’s third bond sale done solely for the purpose of raising money to buy more bitcoin. MicroStrategy said Tuesday afternoon that it expects to raise about $488 million through the sale. Based on bitcoin’s price Tuesday afternoon, that could bring the value of MicroStrategy’s total bitcoin holdings to roughly $3.5 billion.

MicroStrategy’s unorthodox approach to managing its finances has gotten Wall Street’s attention. Five analysts now cover the stock, which has outperformed practically every other software name over the last 12 months with a 264% gain. But that run hasn’t exactly re-rated the business. MicroStrategy’s market value of about $4.5 billion at Tuesday’s close suggests investors are valuing the core software operation ex-bitcoin at just under $1 billion, a discount of more than 20% to the company’s market value before its cryptocurrency experiment started last summer. Viewed this way, MicroStrategy is actually a serious laggard; only four other stocks on the S&P 500 software group have lost value over the last 12 months.

MicroStrategy, in other words, is now more of a bitcoin tracking stock than a software stock. Many analysts and the company itself seem fine with that. Speaking at a bitcoin conference over the weekend, co-founder and Chief Executive

Michael Saylor

called the cryptocurrency the “seminal invention of the human race” and says the investments “imbued life into the company.”

Brent Thill

of Jefferies described MicroStrategy as “more bitcoin than BI” intelligence when he started coverage of the stock in March. And Canaccord’s

Joseph Vafi

called the stock “one of the best ways to play [bitcoin] in the public markets” in his own report in late April. Mr. Vafi has a $920 price target on the shares — double their current price.

But such a tie-up has its obvious drawbacks. The stock is now closely tied to bitcoin’s extreme price swings; the value of the cryptocurrency is down nearly half from its peak in mid-April. Such volatility undercuts the “store of value” argument advanced by bitcoin’s vocal supporters — and MicroStrategy itself when it embarked on its plan. The stock has lost 46% of its value since bitcoin peaked.

All the buzz around bitcoin is masking improvements in MicroStrategy’s core business. The company reported its best revenue growth in nine years in its first-quarter report on April 29, solidly beating analysts’ projections. That report moved the stock up only 0.3%, as Citi analyst

Tyler Radke

called the results a “nonevent given the outsize valuation from bitcoin.” Sometimes misdirection works too well.

Write to Dan Gallagher at dan.gallagher@wsj.com