The effect is much more subtle and it has more of an impact on companies where equity is a big part of employee compensation.
Netflix's market value falling 72% means the market has a negative view of Netflix's foreseeable ability to sustain or grow revenues and profits.
You are right in that it is possible that Netflix has the market fooled and in reality is growing its revenues and profits and cash flows at an even greater rate than expected and it is all just one big misunderstanding.
If that is the case, Netflix can always choose to 'go private', where it no longer sees a need for public market funding and believes that savvy private investors combined with its revenues and cash flows can fund its operations and growth.
But as a public company, its stock price and market value also signify access to capital. The less capital Netflix has access to, the less it can invest in its existing and growth operations, like the 100s of shows it creates every year.
With access to less capital, Netflix will keep on fewer of its 'dream team athlete' workers, even with their all cash and no stock compensation, which is why we are starting to see layoffs.
If their stock price keeps tanking, layoffs are inevitable. This is sadly true for much of the economy if it goes into recession.
Netflix's market valuation is extremely relevant. The only reason we are discussing Netflix on this thread is that layoffs there have begun.