diff --git a/apis/elbv2/manualv1alpha1/target.go b/apis/elbv2/manualv1alpha1/target.go
index 42ce068e9c..1bef462a40 100644
--- a/apis/elbv2/manualv1alpha1/target.go
+++ b/apis/elbv2/manualv1alpha1/target.go
@@ -185,7 +185,7 @@ type TargetObservation struct {
 	TargetHealth *TargetHealth `json:"targetHealth,omitempty"`
 }
 
-// GetState returns TargetHealth.State if it is not nil, otherwise an empty
+// GetState returns s.TargetHealth.State if it is not nil, otherwise an empty
 // string.
 func (s *TargetObservation) GetState() string {
 	if s.TargetHealth != nil && s.TargetHealth.State != nil {
@@ -194,6 +194,15 @@ func (s *TargetObservation) GetState() string {
 	return ""
 }
 
+// GetReason returns s.TargetHealth.Reason if it is not nil, otherwise an empty
+// string.
+func (s *TargetObservation) GetReason() string {
+	if s.TargetHealth != nil && s.TargetHealth.Reason != nil {
+		return *s.TargetHealth.Reason
+	}
+	return ""
+}
+
 // TargetStatus defines the observed state of a
 // Target
 type TargetStatus struct {
diff --git a/pkg/controller/elbv2/target/controller.go b/pkg/controller/elbv2/target/controller.go
index e2adc3e2c0..01694acbd1 100644
--- a/pkg/controller/elbv2/target/controller.go
+++ b/pkg/controller/elbv2/target/controller.go
@@ -130,7 +130,7 @@ func (e *external) Observe(ctx context.Context, mg resource.Managed) (managed.Ex
 	}
 
 	return managed.ExternalObservation{
-		ResourceExists:   true,
+		ResourceExists:   cr.Status.AtProvider.GetReason() != string(types.TargetHealthReasonEnumNotRegistered),
 		ResourceUpToDate: true, // Targets cannot be updated
 	}, nil
 }